Foreign reserve dips below $30bn

The foreign exchange reserves of Bangladesh fell below $30 billion on Monday, following a payment of $1.18 billion in liabilities to the Asian Clearing Union under a payment arrangement between the central banks of a number of Asian countries, reports UNB.

With that, the country’s foreign reserve came down to $29.8 billion on Monday from 30.98 billion.

It should be noted however, that the Bangladesh Bank at present chooses an archaic of reserves that hinges on both 'encumbered' and 'unencumbered' reserves counting towards the final figure which often shows figures different than that of the actual figure.

In 2021, the IMF sounded out for the first time that it had identified a sum of around $8 billion in the Bangladesh Bank's books that should be viewed as 'encumbered', and left out of the reserve calculation.

The bulk of the $8 billion is bound up in the Export Development Fund. There is a large loan, denominated in Euros- 525 million Euros - to the Payra Port Authority. And the $200 million in a currency swap with Sri Lanka, which obviously is in no position to pay it back yet.

Almost every economist agrees that what cannot be spent should not be counted in foreign reserves and that $8 billion should be subtracted from Bangladesh Bank's official figure. Otherwise, the actual figure of the foreign reserve of the country cannot be estimated.

The Bangladesh Bank has finally come around to this suggestion in their dealings with the IMF, and on Sunday it declared the next half-yearly Monetary Policy Statement will be announced on 1 July following the IMF's suggested method for reserve calculation.

Meanwhile the forex reserves are somewhat stressed again as the flow of inward remittances and export earnings show a decreasing trend.

According to the figure of the Bangladesh Bank, the country’s foreign reserve went near the $30 billion mark lastly in 2015-16. The country’s reserve was $30.35 billion in June, 2016.

However, the country’ reserve dipped below $30 billion on 8 September, 2022. Following a payment of $1.73 billion to the ACU on that day, the country’s reserve declined to $37.06 billion from $38.94 billion. If the encumbered $8billion is subtracted, then the real figure would drop below $30 billion.

And after the payment on Monday, the actual reserve of the country stands at $22 billion. The reserves have declined by $14 billion since April.