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Bangladesh - Bank & Finance - 4 weeks ago

Rauf Talukder takes reserve to bottom

Staff Correspondent: In August 2021, foreign exchange reserves crossed the highest mark of $48 billion in the country’s history. This record was made during the tenure of former Bangladesh Bank Governor Fazle Kabir. However, Fazle Kabir himself could not hold the reserve. It started to decline during his tenure after the current governor Abdur Rauf Talukda took charge of the Central Bank. In just two and a quarter years after he took charge, the gross reserve came down to $25 billion.
Data analysis shows that Abdur Rauf Talukder took office as the 12th Governor of Bangladesh Bank on July 12, 2022. At that time, the status of Bangladesh Bank’s foreign exchange reserves was $39.791 billion. And on April 24, the foreign currency reserve decreased to $25.382 billion. That is, two and a half years after Abdur Rauf Talukda took charge as the governor, the reserve of Bangladesh Bank has decreased by $14.409 billion. The current governor’s reserves have declined in two-and-a-half years, no other governor has seen such a decline in his entire tenure.
Meanwhile, in addition to the fall in reserves, there has been a huge change in the dollar rate in its two-quarter years. According to the data, the average dollar rate on July 13, 2022 was Tk 93.45. Last April 24, it stood at Tk 110. That is, during this period, the price of the dollar increased by Tk 16.55.
Experts said it was a wrong decision of Bangladesh Bank to ‘artificially’ maintain the value of taka against the dollar and to sell dollars from reserves while maintaining the price. As a result, a record amount of reserves fell within a short period of time.
According to economists, more expatriate income is coming in informal channels and hundi than the depletion of reserves every month. As a result, the difference in dollar exchange rates between formal and informal channels was wide.
A record amount of dollars has been sold from the reserve during the tenure of the current governor. Basically, because the supply is less than the demand, the dollar sells. Still the dollar continues to sell.
According to the data, $25.15 billion have been sold from the reserve in the last two quarters. 2022-23 fiscal year sales were $13.5 billion. And from the beginning of the current fiscal year to April 22, $11.65 billion were sold.
Abdur Rauf Talukder joined as the governor of Bangladesh Bank and took various initiatives to overcome the dollar crisis. However, these initiatives did not end the crisis. Rather, the crisis has become more pronounced.
Initiatives like selling dollars to overcome the crisis. As this did not work, the government took the initiative to control imports from the middle of 2022. For this reason, duty was first increased and 100% LC margin was imposed. After that the central bank starts verifying every major LC. As this did not work, ABB and BAFEDA are fixing a dollar rate through the mediation of the central bank from September 2022.
But most of the banks are not getting dollars at this rate and are selling at higher rates. Still the dollar continues to trade at higher rates than announced. Apart from this, various initiatives like fixing the future price (forward rate) of the dollar, halving the limit of foreign exchange deposited as exporter’s retention quota (ERQ), currency swap and RFCD account are taken.
On the other hand, loan assistance is also taken from the International Monetary Fund (IMF) to prevent reserve decline. However, despite increasing the temporary reserve, a permanent solution is not found.
Abdur Rauf Talukder said that inflation and the instability of the dollar market will become bearable within two to three months at the Ninth Banking Conference at the premises of Bangladesh Institute of Bank Management (BIBM) a month after joining as the governor. However, after two and a quarter year of accession, inflation and the dollar market are still not under control.
Fazle Kabir was the governor of Bangladesh Bank before Abdur Rauf Talukdar. He was the governor of Bangladesh Bank for two terms and one hundred and seven years. He assumed office as the Governor on March 22, 2016. At that time the reserve status was $30.492 billion. The two terms ended on July 3, 2022. The reserve position at the time of retirement was $41.983 billion. During his tenure, the reserves increased to $11.491 billion.
Fazle Kabir joined as the tenth governor of Bangladesh Bank on May 1, 2009. Atiur Rahman,on completion of 4 years in the first term, the government extends its term further. He was appointed for another four years but could not complete the term. He had to resign earlier in the case of reserve theft. When he took charge, the reserve status of Bangladesh Bank was about $7.470 billion. At the time of resignation, the reserves stood at $27.842 billion. During his tenure, foreign exchange reserves increased to $20.372 billion.
Besides, he served as the ninth governor of Bangladesh Bank Salehuddin Ahmed. On May 1, 2005, he took charge as the Governor of Bangladesh Bank. At that time the reserve status was $3.483 billion. He passed away on 30 April 2009. At the time of departure, the reserve status of Bangladesh Bank was $7.470 billion. That is, the reserve increased by $3.987 billion during the tenure of this governor.
Before Salehuddin Ahmed,Fakhruddin Ahmadserved as the eighth governor of Bangladesh Bank. He served as Governor from 29 November 2001 to 30 April 2005. During his time the reserves increased to $1.901 billion. In addition, Dr. The reserve decreased to only $59 million during the tenure of Mohammad Farasuddin and $195 million during the Lutfur Rahman government.
Incidentally, Bangladesh Bank now calculates reserves in two ways. One is Bangladesh Bank’s own method. The other is the IMF method. Currently, Bangladesh Bank has $25.382 billion as its own reserve. According to IMF-approved BPM-6, reserves are $19.973 billion.

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