Reserves drop to $20.46b after ACU clearance
Bangladesh Bank data shows that reserves were $21.78 billion based on the Balance of Payments and International Investment Position Manual (BPM6) on 4 July
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Following the clearance of $1.42 billion in import bills through the Asian Clearing Union (ACU) for May and June, the country's foreign exchange reserves stood at $20.46 billion according to BPM6 standards on Wednesday (10 July).
Bangladesh Bank data shows that reserves were $21.78 billion based on the Balance of Payments and International Investment Position Manual (BPM6) on 4 July. It means the reserves have decreased by $1.32 billion in the last six days.
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. The bills are cleared every two months.
Earlier on 8 May, the Bangladesh Bank cleared $1.6 billion for imports during the March-April period. At that time, reserves after payments stood at $18.22 billion.
By the end of June, Bangladesh had received over $2.36 billion from four multilateral lenders and one bilateral partner, including the third tranche of the IMF's loan. This is a significant development for a country struggling with dwindling foreign exchange reserves over the past two years.
The IMF had set a target for Bangladesh to maintain its net international reserves (NIR) at $14.69 billion by 30 June this year. The Bangladesh Bank said its net foreign exchange reserves were over $16 billion at the end of June.
Meanwhile, according to BPM6, the country's total reserves stood at $21.83 billion as of 30 June. Earlier, on 26 June, this amount was $19.4 billion, said Bangladesh Bank Spokesperson Md Mezbaul Haque.
According to central bank data, Bangladesh had to clear $1.29 billion in ACU bills for the January-February period. At that time, after clearing this bill, the country's reserves decreased to $20 billion.
According to a Bangladesh bank report, the country witnessed its highest letter of credit (LC) openings in 23 months, amounting to $6.83 billion in May 2024, amid an ongoing foreign exchange crisis.
Previously, the highest LC opening was recorded in June 2022, reaching $7.02 billion. Since then, fluctuating dollar exchange rates and the domestic currency, the taka, have generally led to a decreasing trend in LC openings.
A treasury head at a state-owned bank told The Business Standard that imports have fallen drastically over the last two years due to the central bank's imposition of an import LC margin. Currently, LCs are being opened for over $5 billion per month. As a result, the growth of private loans has decreased over the past year and a half.
'"The country's importers were importing around $8 billion per month in the fiscal 2021-22. During that time, the country's private credit growth was close to 14%. Now, the growth of private credit has fluctuated, increasing and then decreasing suddenly. This is because some imports increased due to the two Eid festivals,'" he added.
According to data from the Bangladesh Bank, in the first nine months of the just-concluded fiscal year, LC openings and settlements decreased by 1.87% and 12.59%, respectively, compared to the same period of the previous fiscal year.