Bangladesh sees forex reserves fall back again to $19 billion

Central bank officials attribute the drop to the $1.67 billion payment to settle import bills

Bangladesh's foreign currency reserves have once again dipped below the $20 billion threshold, marking a recurring trend in decline within a span of a month.

According to the recent data released by the central bank on Thursday, the reserves stood at $19.93 billion - a figure calculated using the International Monetary Fund's BPM-6 methodology.

A significant contributor to this decline was the $1.67 billion payment made to the Asian Clearing Union, or ACU, for import bills accumulated over November and December.

Central bank officials have pointed to this payment as the primary reason behind the drop, noting that the reserves often hover near $20 billion before such payments are settled, only to dip below the threshold once the obligations are cleared.

In September and October of last year, reserves fell below $20 billion. By November, the figure rose back to $20 billion, but subsequent ACU bill payments led to a decrease, with reserves dropping to $19 billion by mid-December.

Following an increase in dollar purchases by Bangladesh Bank, the reserves briefly exceeded $20 billion on Dec 23, 2024, reaching $20.16 billion.

This figure peaked at $21.33 billion on Dec 29, 2024, the highest level since Jun 30, 2024, only to fall below $20 billion again three weeks later, after the ACU bill was paid.

The ACU is an inter-regional settlement system facilitating instant transactions between central banks in Asia. Member countries, including Bangladesh, India, Iran, Nepal, Pakistan, Sri Lanka, Myanmar, Bhutan, and the Maldives, rely on the system for import-export settlements.

The country's foreign exchange reserves had peaked to a record $48 billion during the height of the COVID-19 pandemic in 2020.

However, since the pandemic subsided, rising import costs, exacerbated by global fuel and food price surges and the ongoing war in Ukraine, have contributed to the steady decline of reserves, a trend that has persisted since 2022.

Just four days before the fall of the Awami League government, the central bank released its reserve figures, which stood at $20.48 billion on Jul 30, 2024. The same amount was recorded again on Aug 21, 2024.