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Forex reserve dips by $3.73b in 4 months, dollar appreciates more - newagebd.net

A file photo shows the Bangladesh Bank headquarters in the capital, Dhaka. The country’s foreign exchange reserve has decreased by $3.73 billion in the last four months after reaching a record high of $48 billion due to the recent surge in import payments and a sharp decline in remittance earnings. — New Age photo

The country’s foreign exchange reserve has decreased by $3.73 billion in the last four months after reaching a record high of $48 billion due to the recent surge in import payments and a sharp decline in remittance earnings.

The latest Bangladesh Bank data showed that the country’s foreign exchange reserve dropped to $44.36 billion on January 6, 2022, down $3.73 billion from $48.09 billion on September 1, 2021.

Before the decline in the last four months, the country’s reserve had increased by $16 billion since the Covid outbreak hit the country in March 2020.

The reserve stood at $31.99 billion in March 2020 and increased to $48 billion in a span of 17 months.

The government issued a $200-million loan to Sri Lanka as part of a currency swap agreement with the country which is struggling hard to manage its import payments even after imposition of sanctions on imports.

BB officials said that the country’s reserve had dropped as restoration of business and economic activities, including that in Western countries, had prompted Bangladeshi factory owners to reload warehouses with industrial inputs.

An increase in orders from buyers was the main reason for the factory owners’ move to increase industrial inputs, they said.

The country’s import grew by 53 per cent against a 22.65 per cent growth in export earnings in the July-November period of the current fiscal year 2021-2022.

As a result, the country’s trade deficit grew by more than three times in the July-November period when there was a sharp decline in remittance earnings.

The recent BB data showed that the import of intermediate goods, petroleum and industrial raw materials grew by 69 per cent, 101 per cent and 48 per cent respectively year-on-year in the July-November period of FY22.

Higher import spending compared with export earnings coupled with a sharp decline in remittance earnings has resulted in an erosion of the country’s reserve in the last several months, said the BB officials.

The country’s remittance earnings have been on the decline since May 2021.

In the first half of FY22, the inflow dropped by 20.91 per cent or $2.71 billion to $10.24 billion from $12.94 billion in the same period of the previous fiscal year.

Due to the lower foreign currency earnings against spending, the central bank had to pump US dollars into the market with a view to preventing an abnormal hike in the exchange rate.

Despite the fact, the exchange rate of US dollar on the interbank money market increased to Tk 86 on January 9 from Tk 84.8 on August 1.

The BB in FY22 has so far injected around $2.2 billion in the interbank money market after purchasing heavily from the local market.