Temporary relief has returned to the country’s foreign exchange reserves. But in the short to medium term, discomfort remains. Bangladesh is getting a loan of 1.31 billion dollars from several other multinational organizations including the second tranche of the International Monetary Fund (IMF) loan. In this, the net reserve will again cross the $20 billion mark (one billion in 1 billion). However, in the first week of January, the Asian Clearing Union (ACU) will have to pay more than $100 million in debt. Reserves may then come down to $19 billion again. Meanwhile, the IMF has predicted that gross reserves will decrease further by the end of the current fiscal year. At the end of June, the reserves will stand at $24.30 billion.
According to the sources, various types of crises have been going on with the country’s foreign exchange reserves for the last two and a half years. As reserves dwindled, the dollar rose. As a result, the rate of inflation increased. People’s purchasing power has decreased. This has reduced the standard of living especially of low- and middle-income people. To reduce the pressure on the reserves, the government is taking loans from various organizations including the IMF under strict conditions. Still the reserve situation is not improving. In August 2021, gross reserves rose to a maximum of $4,806 million. Since then, reserves have been declining. At the beginning of the day last Thursday, gross reserves decreased to $2,463 million. In the last two years and four months, the gross reserve has decreased by $2,343 million. Decreased by about 50 percent.
Meanwhile, the second tranche of the IMF loan of $690 million may be released on Friday. If this is credited to the central bank, gross reserves will rise to cross the $25 billion mark. Then the reserve will stand at $2,532 million.
At the same time, the net reserve will be $1,986 million. Foreign loans from several other organizations will be waived within this month. Of this, the Asian Development Bank (ADB) will get $400 million, a South Korean government fund of $90 million and other organizations will get another $130 million. A total of $131 million will be met with the IMF. Due to these loans, the net reserve will increase to $2,048 million and the gross reserve will be $2,594 million at the end of December. Some small debts must be paid by December. Apart from this, there is no major debt. As a result, the cost of money from December reserves will be less. On the other hand, if the loan money is available, the reserve will increase.
However, in the first week of January, Akur has to pay more than $100 million in debt. Then net reserves will come down to $19 billion again. At the same time, the gross reserve may decrease to $24 billion. Large foreign loans will not be available from January to March. As a result, the reserves may decrease again at that time. Because I have to pay the debt again in February. Then the reserves may decrease further.
Meanwhile, the IMF has predicted that reserves will decrease till June next year. Next June, gross reserves may fall to $2,430 million, which is $33 million less than now. That is, even if you get a loan, the reserve does not increase in the medium term. Rather decreasing.
Meanwhile, short and long term debt repayment pressure is still there. Short-term debt is now $1,700 million. Of this, about $8 billion will have to be paid by next June. Besides, most long-term debt has to be paid in the coming year. Altogether, external debt repayment pressure will increase in 2024. With this, the cost of import may also increase. Because the prices of many products including rice have started to increase in the international market.
According to the IMF report, in the current financial year, the import expenditure will increase less, compared to that, the export income will increase more. However, in the coming year, the export income will increase less, the import cost will increase more. As a result, the current account deficit will also increase. Considering the current account deficit, the dollar crisis will not end in the next year. There is also an overall shortage of foreign exchange. If this deficit is not reduced, the reserve will not increase. As a result, reserves are unlikely to increase in the medium term. However, according to the IMF, gross reserves will increase and cross the $3 trillion mark in 2025.
Meanwhile, on the day after the approval of IMF’s proposal to relax the money, the association of chief executives of banks, Bangladesh Foreign Exchange Dealers Association (BAFEDA) and Association of Bankers, Bangladesh (ABB) decided to reduce the dollar price by 25 paise, which will be effective from Sunday. Although the dollar is being sold in banks at fixed rates is very low.
Meanwhile, the central bank thinks that the remittance flow will increase in the future due to the increase in the price of the dollar. Expatriates come to the country in winter. Due to this, remittances may increase in January and February. Apart from this, remittances may also increase during Eid of fasting in March and Eid of Qurbani in May. The recession in Europe has also started to end. As a result, there is a possibility of increasing export earnings.
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