Staff Correspondent: Bangladesh is overcoming the impact of global recession by relying on expatriate income and export income. In particular, the pressure on Bangladesh’s foreign exchange reserves is gradually decreasing. Meanwhile, Bangladesh is going to get about $2 billion of budget support in the current financial year through the co-funding initiative led by the Asian Development Bank (ADB) by next June.
Of this, ADB alone will pay about $750 million. This fund will come to Bangladesh in two phases. In the first phase, $1.05 billion will come in this April and another $1 billion will come in June. This will help reduce the increasing pressure on foreign exchange reserves.
Meanwhile, the export development fund (EDF) is not providing loans as before. Instead, necessary directions have been given to the banks to return EDF money on time. Apart from this, it has been decided to stop new financing in the respective banks until the loans which have expired, are adjusted.
Central bank officials say that various initiatives have been taken to reduce the pressure on reserves. Several top officials of Bangladesh Bank claim that they are not worried about the reserves at the moment. Dollars are being spent to keep reserves comfortable until next June.
Bangladesh Bank Assistant Spokesperson Md. Sarwar Hossain said that due to regular monitoring of import credit information, it has been possible to reduce the cost of import. He said that earlier the import was $8.5 billion, but now the import has come down to $5.5 billion. That is, the import cost in the
month has decreased by three billion than before. Besides, remittances have started increasing more than before. The pace of export earnings is also good.
However, Bangladesh Bank continues to sell dollars to various banks to keep the foreign exchange market stable. From July to April 9 of the current financial year, dollars were sold from the reserve for $11.22 billion. Before this, so many dollars were not sold in the entire financial year. During the whole of the last financial year, the dollar sales amount was $7.62 billion. Meanwhile, the reserves have remained at $31 billion for more than a month despite the huge dollar sales.
Meanwhile, the reserves have remained at $31 billion for more than a month despite the huge dollar sales. At the end of Thursday (April 13), reserves stood at $31.16 billion.
According to Bangladesh Bank, the growth in export earnings may be seven and a half percent by next June. And in the current financial year, the amount of exports may be close to $53 billion. Apart from this, remittances increased by 4 percent in June and expatriate income is likely to be close to $23 billion in the current fiscal year.
Meanwhile, according to the advice of the International Monetary Fund (IMF), Bangladesh Bank will conduct an actual calculation of the country’s foreign exchange reserves from next June. As part of this, Bangladesh Bank is reducing the size of the Export Development Fund (EDF) loan made up of reserves through quick adjustment. In the meantime, the size of EDF has been reduced by $1.8 billion to $5.2 billion. Despite the daily selling of dollars, the reserve situation is improving.
Lately no major installments of external debt have to be repaid – this is another reason behind the improving reserve situation.
However, according to the IMF, the deficit in terms of foreign exchange income and expenditure will decrease in the current year but will increase in the next year. As a result, the dollar crisis will increase in the coming year. This information has been highlighted in the IMF’s ‘World Economic Outlook April 2023’ report published on April 11 night.
The IMF has said several positive things about Bangladesh in the report. According to the organization, the ongoing crisis of foreign exchange in Bangladesh will gradually decrease. As a result, current account deficit of foreign currency (account of foreign exchange income and expenditure) will be 2 tenths of 1 percent of GDP this year. Last year the deficit in this sector was 4.1 percent of GDP. Compared to the last financial year, the deficit in this sector will be reduced by half in the current financial year.
According to the data of the central bank, despite the sale of record amount of dollars in the market in the current financial year, the reserve situation has not deteriorated much. Reserves have remained at $31 billion since the payment of $1.05 billion in liabilities to the Asian Clearing Union (ACU) last month.
According to the officials of Bangladesh Bank, not only EDF’s loan adjustment, but also the steps to check product prices through regular monitoring are playing a role in maintaining reserves. Apart from this, foreign loans, increase in remittances and export earnings are also helping to prevent decline in reserves.
It is known that as an initiative to increase the real reserve, the central bank has decided to separate the funds formed in the form of reserves and wrap them up in phases. In the meantime, refinancing from the Green Transformation Fund formed out of reserves has been completely stopped. And it has been decided to gradually reduce the size of EDF. Due to this, various strictures are being imposed on financing from this fund.
Bangladesh Bank has reduced the loan limit from Export Development Fund (EDF) last Sunday. Earlier, the loan limit from this fund was $2.5 million. And now you can take a maximum of $2 million.
In this context, researcher of Bangladesh Development Research Institute BIDS and Chairman of Agrani Bank. Zayed Bakht said that Bangladesh Bank has taken realistic initiatives to retain foreign currency reserves. He said that due to pressure on the balance of payments, the exchange rate and the value of money have decreased. In addition, there has been inflation. Besides, the foreign exchange reserves have decreased slightly. He said, what Baladesh Bank has done so far is to coordinate all these three.
That is, the foreign exchange reserves have decreased slightly. The value of money has decreased somewhat. Inflation has increased somewhat.
He mentioned that the gap between the dollar exchange rate of the central bank and the market is gradually getting fixed. Besides, Bangladesh has started to overcome the negative effects of war between Russia and Ukraine. Remittances and export earnings play a major role in increasing reserves. Remittances are already increasing now. There are two Eids ahead, so remittances will increase further.
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