Bangladesh’s forex reserves fall below $30bn for first time in 7 years

The foreign currency reserves have dropped below $30 billion for the first time in almost seven years after the government paid off $1.1 billion in import bills to the Asian Clearing Union, or ACU, for March and April.

The Bangladesh Bank sent the payment on Sunday which was confirmed on Monday.

Central bank spokesperson Mezbaul Haque said after settling the ACU payment, the reserves stood at $29.7 billion.

The last time the reserves were below $30 billion was in June 2016.

In January, the International Monetary Fund projected that Bangladesh’s forex reserves would slip below $30 billion by the end of 2022-23 financial year amid the ongoing global economic crisis.

The IMF made the forecast while evaluating Bangladesh’s proposal for a $4.7 billion loan.

With the current reserves, Bangladesh can pay off import expenses of three and a half months. A country needs to have reserves of foreign currency amounting to three months of import costs, as per global standards.

However, the IMF also predicted that Bangladesh’s reserves would climb to $34 billion by the end of the 2023-24 financial year.

According to the central bank, the reserves stood at $21.55 billion in June 2014. The upward trend then began pushing the reserves up, riding on export earnings and remittances.

It reached $32.68 billion in 2019 before surging to $43.16 billion at the end of FY2020 and $46.15 billion the following year. The leaps in foreign currencies occurred due to Bangladeshi expatriates returning to the country during the COVID pandemic along with a drastic drop in import expenditures in that period.

In October 2020, the reserves hit the $40 billion milestone for the first time before peaking to the highest-ever in the country’s history at $48.06 billion in August the following year.

As the COVID cases gradually ebbed, the wheels of economy began turning once again and the import debt began rising, causing the reserves to fall.

However, the economy faced a new gauntlet after Russia invaded Ukraine in February last year.