Following the clearance of $1.42 billion in import bills through the Asian Clearing Union (ACU) for May and June, Bangladesh’s foreign exchange reserves stood at $20.46 billion as of Wednesday (10 July), according to the Balance of Payments and International Investment Position Manual (BPM6) standards.
Reserve Decline
Data from Bangladesh Bank reveals that reserves were at $21.78 billion on 4 July, indicating a decrease of $1.32 billion over the past six days. The ACU, comprising Bangladesh, Bhutan, India, Iran, the Maldives, Myanmar, Nepal, Pakistan, and Sri Lanka, facilitates regional import payments every two months.
Previous Payments and Reserve Status
Earlier on 8 May, Bangladesh Bank cleared $1.6 billion for imports during the March-April period, which reduced reserves to $18.22 billion. By the end of June, Bangladesh received over $2.36 billion from four multilateral lenders and one bilateral partner, including the third tranche of the IMF’s loan, significantly boosting reserves amid a prolonged forex crisis.
The IMF had set a target for Bangladesh to maintain its net international reserves (NIR) at $14.69 billion by 30 June. According to the Bangladesh Bank, net foreign exchange reserves exceeded this target, standing at over $16 billion by the end of June. Total reserves, based on BPM6, were $21.83 billion as of 30 June, up from $19.4 billion on 26 June.
In January-February, Bangladesh cleared $1.29 billion in ACU bills, bringing reserves down to $20 billion at that time. A report from Bangladesh Bank highlighted that May 2024 saw the highest letter of credit (LC) openings in 23 months, amounting to $6.83 billion, amid an ongoing forex crisis.
A treasury head at a state-owned bank commented on the dramatic fall in imports over the past two years due to the central bank’s import LC margin policies. Currently, monthly LC openings are over $5 billion. This policy shift has led to fluctuating private loan growth over the past year and a half.
During the fiscal year 2021-22, importers were bringing in around $8 billion monthly, with private credit growth close to 14%. The recent fluctuations in private credit growth are partly attributed to increased imports during the two Eid festivals.
Bangladesh Bank data shows a decrease in LC openings and settlements by 1.87% and 12.59%, respectively, in the first nine months of the recently concluded fiscal year compared to the same period in the previous fiscal year.
