Bangladesh’s foreign exchange reserves stood at $19.16 billion as of December 13 as per the International Monetary Fund’s BPM6 method.
According to the Bangladesh Bank data, reserves increased by $35 million in one week. The country had foreign currency reserves of $19.13 billion on December 6.
The central bank’s updated data showed that gross reserves stood at $24.62 billion on December 13.
However, IMF’s $689 million is going to be added to the country’s foreign reserves on Friday, according to the Bangladesh Bank.
It said that $1.31 billion is being added to foreign exchange reserves this month as the country is on track to acquire loans from different sources, including International Monetary Fund (IMF), Asian Development Bank (ADB) and South Korea.
Bangladesh Bank started following international standards in calculating foreign exchange reserves as per a condition set by IMF for a $4.7 billion loan approved for Bangladesh earlier this year to mitigate forex crunch.
Since 2012, IMF member countries have been calculating reserves with Balance of Payments and Investment Position Manual (BPM6). But BB took over a decade to implement it.
Reserves calculated as per the BPM6 method are not the net or actual reserves of Bangladesh. Several short-term liabilities, including SDRs from IMF, are excluded from calculating net reserves. According to that, Bangladesh's net reserves are now around $20 billion.
An analysis of Balance of Payment (BoP) data clearly indicates that the government has been mostly unable to curb the steady loss of foreign exchange reserves.
Bangladesh Bank pumped $8.22 billion from reserves to stabilise the balance of payment in the last FY, which was $6.5 billion in FY22. As a result, gross reserves fell from $41.82 billion to $31.2 billion in FY23.
Calculated under the International Monetary Fund (IMF) method, these reserves would stand at $33.38 billion and $24.75 billion in FY22 and FY23 respectively.
At the end of last FY, Bangladesh had the capacity to cover 4.6 months of import expenses with the reserves. Experts warn that as this figure continues to decrease, it will take down the country’s capacity for essential commodity imports.
This in turn puts Bangladesh into a path of crisis. Under the international standard, a country must have the capacity for at least three months of import payment, and five months capacity denotes a comfort zone.
Bangladesh has been witnessing volatility in the forex market for the past one and a half years owing to the sharp depletion of forex reserves.
Taka continues to depreciate against the USD due to depletion of reserves. On June 30, the last day of FY22, the USD price was Tk 93.45, compared to Tk 108.35 at the end of FY23. Since this week, the exchange rate has increased to Tk 110.
However, due to the high demand for the US greenback, USD is sold at higher prices in the open market and in some banks as the remittance inflow through unofficial channels has increased.
In FY23, Bangladesh exported the highest manpower in history, but remittance did not come as expected.
During the period, remittances came in at just $21.61 billion against exports of 11.37 lakh manpower. During the Covid-19 pandemic, remittance inflow was $24.77 billion.
