Although remittances have increased a bit before Eid, the cost of imports has increased a lot due to the higher prices in the international market. As a result, the central bank's reserves are continuously declining.
After paying a record import bill, Bangladesh's foreign exchange reserves have come down to below $42 billion.
On Thursday, the first working day after Eid, Bangladesh Bank paid the Asian Clearing Union's (ACU) import bill of $2.24 billion for the March-April period.
Needless to say, Bangladesh has never paid such an amount of ACUs bills before.
The reserves hit the lowest in 18 months or a year and a half. Earlier, in November 2020, the reserve was $41.26 billion.
By international standards, a country must have at least three months' worth of foreign exchange reserves to cover import costs.
The current reserves can be used to cover the five months of imports as per the import cost of last January and February.
Economists and central bank officials believe that the main reason for this is the increase in the country's import cost, decrease in the flow of remittance and sales of US dollars in banks.
“It is only natural that reserves will decrease if imports increase and there is nothing to worry about. There is still a fairly satisfactory level of reserves,” said Dr Ahsan H Mansur, executive director of the Policy Research Institute (PRI).
“However, now we have to reduce imports and focus on increasing remittances and export earnings,” he added.
Earlier, economic researcher Prof Mustafizur Rahman, distinguished fellow at Centre for Policy Dialogue (CPD), told Dhaka Tribune: “The drop in remittance flow has already affected Bangladesh's macroeconomy. But it is natural that the reserves will decrease if imports increase.”
But like Dr Mansur, Prof Mustafizur also thinks that there is still nothing to worry about.
He said: “There is nothing to worry about as the reserves are still satisfactory. It is better to increase imports as this will increase investment in the country. There will be momentum in the economy and employment will increase.”
Serajul Islam, executive director and spokesperson of Bangladesh Bank said: “Prices of all kinds of commodities, including capital equipment and industrial raw materials, are rising as the economy recovers from the shock of Covid-19. Rising prices of fuel oil and food products have also pushed up our import costs. So, the reserve is declining.”
Reserves were steadily rising for several years, breaking one record after another.
Due to a slowdown in imports and rising remittance and export earnings during the pandemic, reserves crossed the $48.04 billion mark on August 24 last year, the highest ever in the history of Bangladesh.
According to the central bank’s data, from July-February of the current fiscal year 2021-22, the import of various commodities was worth $58.77 billion, which is 46.70% more than the same period of the last fiscal year.
On the other hand, Bangladesh bank's latest released data on remittances for the last ten months (July-April) said that the expatriates have sent remittances of $17.30 billion dollars, which is 16.24% less than the same period last year.
But the good news is that the boom in export trade continues. In nine months (July-March), Bangladesh earned $38.60 billion by exporting various products, which is 33.41% more than the same period last year.
Bangladesh, Bhutan, India, Iran, Myanmar, Nepal, Pakistan, Sri Lanka and the Maldives are currently members of ACU.
The bills for the products that Bangladesh imports from these countries have to be paid through ACU every two months.
