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Bank & Finance - October 12, 2023

BB sells $3.75bin 3-month

Dollar erosion continuing

Mahfuja Mukul: The country’s foreign exchange reserves are continuously declining. However, the sale of dollars from the reserve does not stop. Bangladesh Bank has sold $3.75 billion from reserves in the first three months and eight days of the current fiscal year (2023-24) to meet import liabilities. As a result, the gross international reserves decreased by $21.05 billion. And Bangladesh Bank’s reserves decreased by 26 percent to $8.6 billion. This information is known from the sources of Bangladesh Bank.
According to sources, Bangladesh Bank sold these dollars mainly for the import of fuel, fertilizer and food. Unable to collect from the market due to dollar crisis. Hence, the government is supporting imports from reserves.
It is known that $13.58 billion were sold in 12 months of the last financial year. Earlier, the central bank sold a maximum of $7.62 billion in the financial year 2021-22. And in the current fiscal year, $3.75 billion have been sold so far. It sold about $25 billion from reserves in 27 months. Reserves are falling on dollar sales consistently.
According to the report of Bangladesh Bank, at the end of the financial year 2020-21, the reserves of Bangladesh Bank were $46.39 billion. And in the current financial year, it has decreased to $26.86 billion. That is, in 27 months, the reserve has decreased by $19.50 billion.
Dollar crisis has been going on in the country for one and a half years. Despite various measures, the crisis did not end. The current financial year has not started well. The dollar crisis that started the bad state of the economy, the dollar crisis did not end; Rather, the dollar crisis has affected various sectors.
Almost every index is falling in the first quarter of the current financial year. Inflation, repatriation income, foreign exchange reserves, defaulted loans, exports and revenue are not satisfactory indicators. All in all, the stability of the macro economy is now under threat.
Meanwhile, the major strength of the country’s economy is expatriate income or remittances. That expatriate income also has a negative impact. In the first three months of the fiscal year, expatriate income has declined consistently every month. Expatriate Bangladeshis sent $197 million last July. It further decreased to $1.6 billion in August. The latest came in September at $1.34 billion; Which is the lowest expatriate income in a month in the last 41 months. Earlier in April 2020, $109 million came.
Besides, there is not much good news in export earnings. In July, August and September there is growth in every month but it does not inspire hope. Because among the top five export products, except for ready-made garments, four showed negative growth in the last month. Again, the figure of export income is fluctuating on a month-by-month basis. Last July, the export income was 4.59 billion dollars. Later it increased to $478 million. But last September it was again $431 million.
It is known that the opening of letters of credit (LC) in banks has reduced significantly due to the dollar-crisis and import controls. Debt openings fell to $4.69 billion in September, down 28 percent from the same period last year. $6.53 billion loan was opened last September. And $5.59 billion was opened in August this year. As such, the loan opening has decreased by about 16 and a half percent in a month.
On the other hand, in September this year, LCs of $4.37 billion were settled, which is the lowest in the last 35 months. Earlier in October 2020 last LC was settled less than this. And compared to August this year, LC settlement decreased by 16.1 percent last month.
In such a situation, Bangladesh Bank has taken initiatives to increase the supply of dollars in the market. It is known that the traders of the related sectors are delaying the cashing of the foreign currency and dollars deposited as the retention quota (ERQ) of the exporter. In this case, there are allegations of non-cooperation against the banks. In this, the foreign exchange market is hindering the supply of dollars. In this situation, Bangladesh Bank has ordered immediate monetization of 50 percent of the foreign currency deposited as ERQ. As a result, traders have to encash half of the foreign currency kept as ERQ. Last Sunday, a letter regarding this has been sent to the authorized dealer banks engaged in foreign transactions. The central bank hopes that the supply of dollars in the market will increase as a result of the new guidelines.
In that letter of the Foreign Exchange Policy Department of the Central Bank, it was ordered to reserve 50 percent of the status of the ERQ account till September 21 and monetize the rest. It has been asked to implement this instruction immediately. According to sources, more than $600 million was outstanding as ERQ on that date.
A senior official of Bangladesh Bank said that some of the exporters may take this opportunity in the hope of increasing the dollar rate in the future. But most keep it to meet its import liabilities. In this case, the banks do not cooperate with the businessmen in monetizing these dollars to do business themselves. Exporters argue that they may not get dollars in the future or that if they hold dollars now, they will get higher prices in the future. Because they know that not all exporters will come to monetize ERQ dollars in one day.

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