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Forex reserves drop to one-year low

Published : 07 Mar 2022 09:26 PM | Updated : 08 Mar 2022 03:39 PM

The country’s foreign exchange reserves have reduced to about $43.89 billion on Sunday, the lowest in the last one year after the Asian Clearing Union (ACU) payments.

Economists and central bank officials said reserves are declining mainly due to rising imports. 

Apart from this, the decline in remittances sent by expatriates is another reason for the reduction in reserves, they pointed out.

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, reserves crossed US$48 billion mark on August 24, more than ever in the history of Bangladesh.

However, the key economic index fell to $43.89 billion on Sunday after the Asian Clearing Union (ACU) paid a record import bill of $2.16 billion, which was the lowest in the last one year.

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.

Bangladesh, Bhutan, India, Iran, Myanmar, Nepal, Pakistan, Sri Lanka and Maldives are currently members of ACU.

With this reserve as current import costs, it will be possible to meet the import costs of around five months, but even six months ago, Bangladesh Bank had a reserve to meet the import cost of 10 months.

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According to the central bank, the cost of imports has been rising abnormally since the outbreak of the epidemic. 

Before the outbreak of the corona in March 2020, the country spent an average of $4-$4.5 billion a month on imports. In the corona period, it dropped to an average of $3-$3.5 billion.

However, since the beginning of the current 2021-22 fiscal, import payments have jumped continuing to stand at $5.14 billion in July 2021. It was increased to $6.58 billion in August, $7 billion in September, $7.11 billion in October, $7.85 in November, $8.44 billion in December and $8.33 billion in the current fiscal respectively.

Md Serajul Islam, Spokesperson and Executive of Bangladesh Bank, 

told 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, he said adding that, imports are costing more than the reserves.

Ahsan H Mansur, an economist and Executive Director of the Policy Research Institute (PRI), said, “It is only natural that reserves will decrease if imports increase. But there is nothing to worry about. There are still fairly satisfactory reserves.”

“It is better to increase imports,” he said, adding “This will help to boost the country’s economy by increasing investments as well as employment.” 

According to the central bank, Bangladeshi traders and entrepreneurs imported $50.45 billion worth of various goods during July-January of the current 2021-22 fiscal, which was 46.21 percent more than the same period last fiscal year.

During the first eight months in the current fiscal, expatriates sent $13.44 billion in remittances, which was 19.46 percent lower than that of the same period last year.

However, export earnings have increased. In July-February, the country has earned about $34 billion by exporting various products, which was 30.86 percent more than the same period last year.

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