Foreign Exchange Reserves Surpass $37 Billion Again

File Photo

News Desk: The country’s foreign exchange reserves have once again crossed the $37 billion mark. The positive trend in reserves has continued amid increased remittance inflows and greater stability in foreign exchange management.

According to the latest data from the central bank, Bangladesh’s total gross foreign exchange reserves stood at $37.6 billion at the end of Wednesday (August 12). Under the International Monetary Fund’s (IMF) BPM6 methodology, the reserves stood at $32.26 billion.

At the beginning of the month, on August 2, gross reserves stood at $36.47 billion, while reserves under the BPM6 methodology were $31.65 billion. Thus, both measures have shown significant improvement during the month.

However, the entire amount of gross reserves is not usable. After excluding short-term liabilities and other obligations, the net or actual usable reserves are more important for the economy.

Bangladesh Bank internally calculates “usable reserves,” excluding certain components such as the IMF’s Special Drawing Rights (SDRs), foreign currency clearing accounts of banks, and ACU (Asian Clearing Union) payments. However, these figures are not officially disclosed.

Sources at the central bank said that the country’s usable reserves currently stand at around $29 billion. Assuming average monthly import expenditure of $5 billion, this amount would be sufficient to cover more than five and a half months of imports. Generally, reserves equivalent to at least three months of import expenditure are considered safe.

During the final period of the Awami League government, reserves came under pressure due to capital flight and slower remittance inflows. At that time, usable reserves had fallen below $14 billion. Efforts were made to manage the situation by securing foreign loans and purchasing dollars from commercial banks.

Analysis shows that the country’s reserves reached a historic high of more than $48 billion in August 2021. At that time, the exchange rate was Tk 84.20 per US dollar. Subsequently, reserves began to decline due to various factors, including irregularities in lending and capital flight.

When the Awami League government fell on August 5, 2024, reserves had declined to $25.92 billion, while according to the IMF methodology, they stood at $20.48 billion. At the same time, instability emerged in the foreign exchange market, with the dollar exchange rate rising above Tk 120. To control the situation, various restrictions were imposed on imports.

After the interim government assumed office, the exchange rate of the dollar was gradually moved toward a more market-based system. At the same time, various initiatives were undertaken to increase remittance inflows, while import restrictions were gradually relaxed.

The relatively liberal trade policy contributed to an increase in remittance inflows, which helped restore the country’s foreign exchange reserves.

When the current Bangladesh Nationalist Party (BNP) government came to power, the country’s reserves stood at $34 billion, while reserves calculated under the BPM6 methodology stood at $30 billion.