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Forex reserve vital to meet higher import

Published : 07 Jan 2022 11:10 PM

The country's forex reserve is playing a vital role in making higher import payments to ensure sustainable economic growth.

Experts said Bangladesh economy significantly recovered from huge economic losses caused by corona pandemic which pushed import payments up.

They said the imports have rapidly been increased during the last several months, especially for rising imports of industrial raw materials which helped increase the country’s total export earnings.

They said the forex reserves have helped increase investment in the country by clearing higher imports payments.

Due to higher imports, the country’s forex reserves have reduced to $44.44 billion on Thursday, the lowest in a year after clearing the Asian Clearing Union's (ACU) record import bill of about $1.93 billion.

With this reserve, the current import cost can cover the import cost of just over five months, but even three to four months ago, Bangladesh Bank had a reserve to meet the import cost of 10 months.

Asian Clearing Union (ACU) is a payment arrangement whereby the participants settle payments for intra-regional transactions among the participating central banks on a net multilateral basis.

Economists and central bank officials said reserves are declining mainly due to rising imports. Apart from this, decline in remittances sent by expatriates is another reason for the reduction in reserves, they said.

Md Serajul Islam, spokesperson and executive director of Bangladesh Bank, told the Bangladesh Post, “Prices of all kinds of commodities, including capital equipment and industrial raw materials, are rising as the economy recovers from the corona shock. Rising prices of fuel oil and food products have also pushed up import costs. Hence, import payments have increased more from the reserves.

Ahsan H Mansoor, executive director of the Policy Research Institute (PRI) and an economic researcher said, “It is natural that reserves will decrease if imports increase. But there is nothing to worry about this. There are still satisfactory reserves and it is better to increase imports. This will increase investment in the country. There will be momentum in the economy. Employment will increase.”

The reserves also reduced due to negative growth of remittance for the several months, he mentioned.

Remittances cannot be increased by incentives, he said, adding that more skilled people need to be sent abroad to increase remittance flow in the true sense for rising remittance.

“But the good news is that export earnings are rising and it is expected that the trend will continue for the next few days,” Mansoor mentioned.

According to the Bangladesh Bank, the cost of imports in the country has rapidly been increasing since the situation of corona pandemic has become normal. 

Before the outbreak of the corona in March 2020, the country spent an average of $4.5 billion a month on imports. 

During corona period, it dropped to an average of $3.5 billion.

In addition, since the beginning of the current 2021-22 fiscal year, imports have jumped. 

In the first month of the current fiscal, the import of goods was of worth $5.14 billion. In August, it rose to $6.58 billion while in September it reached $7 billion.

The cost of importing goods in October was $7.11 billion and in last November it reached $7.85 billion, higher in the history for one month.

On the other hand, the reserves have been growing steadily for several years after breaking one record after another due to the slowdown in imports and rising remittance and export earnings during the epidemic.

Bangladesh's forex reserves had crossed a $48 billion milestone on August 24, 2021 more than at any time in the past.