$11b injected to cool down forex market

The Bangladesh Bank injected $11.50 billion into banks from July 1st to April 10th of this fiscal to cool down the overheated foreign exchange market.

On Monday alone, the central bank injected $47 million into banks from its forex reserves at the rate of Tk103 per US dollar.

Officials of the central bank said that banks, especially the state-run ones, are taking USD support from the central bank to settle import payments of Bangladesh Petroleum Corporation, Bangladesh Agricultural Development Corporation, and Bangladesh Chemical Industries Corporation among other government entities.

The foreign exchange reserve is stable at $31.24 billion for the last few days despite the USD selling spree from the reserve.

The usable reserves were at $26.04 billion and $5.2 billion as EDF loans.

BB officials said that the reserve is stable for the last few days due to mainly adjusting export development funds (EDF).

As of Monday, the size of the EDF stood at $5.2 billion, down from $7.5 billion in January of this year.

A BB official of the Foreign Exchange Policy Department said that the size of the EDF continued to reduce as BB adjusted EDF loans as per the recommendation of the IMF.

He said that 12 banks suspended the EDF loan disbursement due to the non-payment behaviour of their clients.

On Sunday, the central bank reduced the Export Development Fund (EDF) borrowing limit by $5 million for the textile, apparel and leather sectors to ease the pressure on forex reserves.

Gross forex reserves reached a record high of $48 billion in August of 2021. That month, the Bangladesh Bank started injecting USD into the forex market as banks began facing foreign currency shortages due to growing import payments, triggered by the economic recovery from the Covid-19 crisis.

The currency crisis intensified a few months later when Russia invaded Ukraine in February last year, further disrupting the global supply chain.

However, import payment has fallen in recent times due to the austerity measures of the central bank and the government. From July to February of this fiscal year, the Letter of credit settlement stood at $52.01 billion, down from $52.66 billion at the same period of the last fiscal year, as per the central bank data.