Business & Economy

Bangladesh’s forex reserves hit seven-year low of $29.8 billion

Dhaka, May 9 (EFE).- Bangladesh’s foreign exchange reserves fell below $30 billion for the first time in seven years in a concerning sign for the country’s economy, economists and bankers said on Tuesday.

Bangladesh Bank spokesperson and executive director, Mezbaul Haque, told EFE that the country’s foreign exchange reserves stood at $29.83 billion on Monday after the payment of import bills worth $1.18 billion to the Asian Clearing Union.

The last time Bangladesh’s foreign exchange reserves were less than $30 billion was during the 2014-15 financial year, when the country’s central bank reported a reserve of $25.02 billion, according to its website.

The country’s foreign exchange reserves grew steadily for several years to reach a record $48.06 billion in August 2021 on the back of robust economic growth before declining amid the Covid-19 pandemic and Russia’s war on Ukraine.

“It is really concerning for us,” said Syed Mahbubur Rahman, managing director of leading private commercial bank Mutual Trust Bank.

“The figure of $30 billion is not an issue here. If the situation had been stable, there would have been no concerns. But we do not see a stable situation. The figure is coming down every month,” he told EFE.

Rahman said that falling exports and foreign remittances and a rising cost of imports were the major reasons for the gradual decrease in the country’s foreign exchange reserves.

Zahid Hussain, a former lead economist in the World Bank’s Dhaka office, feared that the gradual fall in foreign exchange reserves might affect the country’s economic growth.

“There is a big gap between the inflow and outflow of our foreign currency. It is not just a concern but a big problem,” he said.

“It is hugely impacting imports. If imports continue to remain low, it will ultimately affect growth and reduce the earning opportunity for people,” he added.

Central Bank spokesperson Haque hoped that the situation would improve in June, when the country is expecting to receive the second installment of the $4.7 billion loan it recently secured from the International Monetary Fund.

“We need to supply banks with dollars to meet their demand. So it may go down again. But we don’t have any major payments left until June. Apart from the IMF installment, we are also hoping to get some money from donors by this time,” he said.

On Jan. 30, the IMF Executive Board approved a $4.7 billion loan package for Bangladesh amid a worrying state of the country’s economy.

As part of the 42-month borrowing package, Bangladesh will get $3.3 billion under the Extended Credit Facility and the Extended Fund Facility arrangements.

The IMF board also approved $1.4 billion under the newly created Resilience and Sustainability Facility for Bangladesh, making it the first Asian country to access the fund.

Bangladesh received the first installment of $476.2 million immediately after the loan’s approval, with the next installment due in June.

The country has been facing multiple economic challenges in recent months, with inflation jumping from 6.22 percent in March 2022 to 9.33 percent a year later. EFE


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