Dollar sales halted, reserve expected to increase: governor

He says stability in foreign currency rates will help control inflation

Bangladesh Bank Governor Ahsan H Mansur has said dollar sales from the country's reserves have been suspended.

“No dollars have been sold from the reserves since I took over. There is no fear of reserve depletion; rather, there is a possibility of increase as more dollars are expected to come in,” he said during a press conference at the central bank offices on Wednesday.

After the Ukraine war began in February 2022, global food and fuel prices surged, leading to increased import costs.

The central bank started selling dollars from its reserves to private banks for Letters of Credit, or LC.

Consequently, gross reserves dropped from $48 billion to $20 billion.

As of Aug 21, 2024, it stands at $20.48 billion, according to the central bank’s latest data.

According to the Bangladesh Bank, $12.69 billion was sold from its reserves to commercial banks for government bonds and LCs in the fiscal year 2023-24.

In the previous fiscal year, this amount was slightly over $14 billion.

Governor Mansur had advised against selling dollars from the reserves even before taking office.

Now, under his leadership, the central bank is purchasing dollars from the interbank market for government bond payments, which are then provided to Sonali Bank to open LCs, he said.

He said some ships are currently stuck at foreign ports due to payment delays.

Necessary steps will be taken to ensure timely arrivals at domestic ports, he added.

The governor said Bangladesh Bank is buying $60 to $70 million daily from the market to open LCs for the energy sector, while $35 million has been allocated for agricultural imports, with an additional $20 to $30 million to be provided.

Mansur sees stability in the dollar exchange rate. “If foreign currency rates remain stable, inflation will be under control.”

Despite halting dollar sales from reserves, the exchange rate has remained around Tk 120 for weeks.

In the next eight months, if the inflation rate can be reduced to 6-7 percent, interest rates can be lowered, said Mansur.

He also expects a decline in rice prices due to anticipated record production in the upcoming seasons.

"Global oil and consumer goods prices are decreasing. This impact will be felt in Bangladesh in about two months.”

"Prices for wheat and other consumables have also decreased, but rice prices have not,” he added.

The governor hopes that rice prices will decrease in the future.

According to the latest report from the Bangladesh Bureau of Statistics, or BBS, overall inflation rose to 11.66 percent in August, which was in single digits in June.