Amid an ongoing dollar crisis, the country's foreign exchange reserves have declined below $37 billion as the central bank continues to sell the greenback to facilitate government imports.
On Wednesday, the reserves stood at $36.97 billion after the Bangladesh Bank sold about $30 million to banks at a rate of Tk96 to settle import Letters of Credit (LCs), according to central bank officials of the department concerned.
The reserves were over $37 billion on Tuesday after the central bank had sold $110 million at the same rate.
Deducting $8 billion – given to various funds such as Export Development Fund loans – from the reserves, the country's usable reserves will stand at about $29 billion.
According to central bank officials, despite an increase in exports and expatriate income in the country, it is still less than the cost of imports. The central bank is constantly selling dollars to facilitate government import of various commodities due to which the reserves are declining.
Seeking anonymity, a central bank official said due to a shortage of dollars in the market, the supply is being made from reserves. As a result, reserves are decreasing.
"Imports are falling as a result of various measures. Exports and expatriate income are increasing. As a result, the demand for dollars is also decreasing. The situation will be normal in the days to come," he added.
Earlier, on 8 September, the reserves dropped to $37.06 billion after the Asian Clearing Union (ACU) payment of $1.73 billion.
In August 2021, the country's reserves stood at $48 billion. As the central bank continues to sell the greenback to pay import bills, the reserves are on the decline.
The reserves faced a large decline in the last fiscal year when the central bank sold $7.6 billion to banks. It has also sold more than $3 billion so far in the current financial year beginning in July.
The country recorded its highest trade deficit of $33.25 billion in the fiscal 2021-22 due to an increase in the cost and volume of imports compared to exports.
At the same time, the current account deficit also exceeded $18.5 billion.
However, since the beginning of the current financial year, the country's foreign exchange market is in a stable position to some extent due to a decrease in import costs and an increase in inward remittances. Now the price of the dollar is determined on the basis of supply and demand.
Import volume has been decreasing for the last two months. Import in terms of LC (Letter of Credit) settlement dropped 20% in August from the previous month thanks to various steps such as elevating the LC margin to 100% to stabilise the country's foreign exchange market. The opening of LCs was also on a downward trend.
LC payments stood at $5.93 billion in August, a drop from $7.42 billion in the previous month, according to the latest report of the Bangladesh Bank.
In addition, the remittance inflows were on an upward trajectory in July and August. Expatriate Bangladeshis have sent home more than $2 billion in remittances each of the first two months of the current financial year. The country has received over $1 billion in remittances in the first 15 days of September.
Interbank dollar market
The average dollar buying price of 55 banks stood at Tk102.26 on Wednesday when the lenders procured the greenback between Tk99 and Tk106.77.
For LC settlement, they sold the dollar keeping a maximum profit of Tk1. Besides, banks have encashed export proceeds at Tk99 and collected remittances at Tk108 as per the previous decision.
Treasury heads of several banks said that due to a decrease in the country's imports, the payment pressure is less than before. Due to these reasons, the price of the dollar is slightly decreasing.
After reviewing the interbank exchange rate information on the Bangladesh Bank website, it was found that on Tuesday the banks traded dollars between themselves at Tk101.78-102.56.
Besides, the dollar was selling at Tk115 in the open market. Traders said they bought the greenback at Tk114. They also said that the supply of dollars has increased slightly.