BB projects $4bn rise in forex reserves in FY23

The country’s foreign exchange reserves are expected to rise by $4 billion by the end of the ongoing fiscal year, the Bangladesh Bank said in its latest projection, instilling hope for a dwindling level of reserve assets.

By the end of fiscal year 2022-23 (FY23), Bangladesh’s forex reserve will increase to $36.5 billion from the existing $32.51 billion, riding on export growth, remittance inflows and a negative growth in imports, the central bank projected in the Monetary Policy Statement (MPS) for the second half of FY23 unveiled yesterday.

According to the policy, the country’s imports are expected to decline by 10 per cent to $80.2 billion year-on-year by next June. During the period, export earnings will increase by 7.5 per cent from $52.08 billion and remittance will increase by 4 per cent to $21.9 billion year-on-year.

Bangladesh’s forex reserve reached a record $48.6 billion in August 2021 but has continued to fall ever since owing to a global economic volatility, despite a set of restrictive measures by the government, including dissuading the imports of luxury goods, fruits, non-cereal foods, canned and processed foods, etc.

Year-on-year, the country’s import declined by 2.2 per cent to $41.2 billion in the first half of FY23 year-on-year.

In the meantime, the government is looking to borrow $4.5 billion from the International Monetary Fund (IMF) to tackle the decline of the forex reserves. The first instalment of the loan amounting to around $45.45 crore is expected to be available in the first week of February. The last instalment of the loan in seven portions will be released in December 2026. The average interest rate on the loan will be 2.2%.

The central bank expects that the fund will also help to reduce forex reserve pressure.

According to the Export Promotion Bureau (EPB), the country set a $58 billion export target for FY23 and $27.19 billion for the first six months of this fiscal year. On the other hand, Bangladesh earned $27.31 billion in export earnings posting 10.6 per cent year-on-year growth in the first half of FY23.

Industry insiders, especially apparel manufacturers, who contributed nearly 84 per cent from total earnings, said due to the ongoing global economic crisis, their orders have reduced drastically since last July, and currently most of the factories are operating with lower orders than their capacity.

Bangladesh Garment Manufacturers and Exporters Association (BGMEA) President Faruque Hassan said, “We posted negative earnings last September while earnings were not good enough in October as well. We fear that earnings will further reduce in the next three to four months.”

Amid the situation, the central bank reduced the export growth target to 7.5 per cent from 11.37 per cent for FY23.

Meanwhile, remittance inflow, another major foreign currency earnings sector, is expected to grow within the remaining period of the current fiscal.

According to the central bank’s projection, Bangladesh will earn $21.9 billion from remittance in FY23, which is 4 per cent higher year-on-year.

Earnings from the sector rose by 2.5 per cent to $10.5 billion in the first half of FY23 year-on-year, according to the policy.

The central bank said, “BB has taken some measures to uplift the volume of inward remittances to a desired level. These include, allowing BDT to depreciate significantly to reduce the exchange rate differential, easing the remittance repatriation and cash incentive distribution process, waiving the money transfers fees by local banks for expatriate remitters, and allowing the mobile financial services in the remittance collection and distribution process.”

“With the support of these policy measures along with record-high overseas employment in 2022, the inward remittances growth is expected to improve soon,” it added.