Forex reserves slip below $22b after ACU payment

Highlights:

• Gross reserves came down to nearly $21.5b on Sunday
• The reserves stood at $23.06b on 30 Aug
• ACU payment was $1.3b in Jul-Aug 
• ACU payment was $1.18b in Mar-Apr and $1.1b in Jan-Feb 

The country's foreign exchange reserves fell below $22 billion after clearing the import bills of $1.3 billion with the Asian Clearing Union (ACU).

Md Mezbaul Haque, spokesperson for the Bangladesh Bank, said that the ACU payment for July and August were cleared on Sunday.

According to the new guideline of the International Monetary Fund (IMF), the gross reserves came down to nearly $21.5 billion on Sunday, said officials at the central bank. The reserves stood at $23.06 billion as of 30 August. 

On 13 July, the Bangladesh Bank calculated forex reserves according to the Balance of Payments and International Investment Position Manual, Sixth Edition (BPM6) suggested by the IMF. After that, the country's gross foreign exchange reserves according to a new calculation dropped by $6.44 billion to $23.56 billion.

The ACU payment gateway covers monetary transactions by its nine member countries – Bangladesh, Bhutan, India, Iran, the Maldives, Myanmar, Nepal, Pakistan, and Sri Lanka – for regional imports. 

According to data from the central bank, the country cleared $1.1 billion in ACU payments for the May-June period in July.

The ACU payment was $1.18 billion and $1.1 billion during the March-April and January-February periods this year, respectively.

Bangladesh's import payment and the opening of letters of credit (LCs) fell sharply in the last fiscal year due to the shortage of US dollars.

According to the central bank, private and public entities opened LCs of $69.36 billion in fiscal 2022-23, down 26% from $94.26 billion a year ago.

Even though imports have decreased, the decline in reserves has not stopped because the central bank has not reduced the sale of dollars from the reserve.

The Bangladesh Bank sold $13.58 billion to banks in FY23, compared to $7.62 billion in the previous fiscal year, to settle import bills.

Last February, the IMF disbursed $476.27 million to Bangladesh as the first tranche of the $4.7 billion loan. The second instalment is expected to be released later this year.

According to the terms of the IMF loan agreement, the country's net reserves should be $25.31 billion in September and $26 billion at the end of December.