1
The country’s foreign exchange reserves remain strong even after settling the import bills of the Asian Clearing Union (ACU). Bangladesh Bank has paid approximately $1.5149 billion to cover import liabilities for the March-April period. Despite this, the country’s total foreign exchange reserves stand at over $34 billion.
Even after this large payment, a sense of relief prevails in the dollar market. The main reason for this is the continuously increasing flow of expatriate earnings, or remittances, in the current fiscal year. According to experts, the high inflow of remittances is playing a crucial role in managing the pressure on foreign exchange.
According to the latest data from Bangladesh Bank, the country’s gross foreign exchange reserves stood at $34.14 billion at the end of May 10. However, if calculated using the International Monetary Fund’s (IMF) BPM-6 method, the reserve amount is $29.48 billion.
Central bank officials stated that although the ACU bill payment created temporary pressure on reserves, the positive trend in remittance inflow is helping to keep the overall situation stable.
Bangladesh Bank data indicates that in the first 9 days of May alone, the country received $1.029 billion in remittances. During the same period last year, this amount was $864 million, showing an annual growth of approximately 19 percent. From May 7 to 9—just these three days—remittances amounted to $277 million.
From the beginning of the current fiscal year up to May 9, total remittances received amounted to $30.36 billion, compared to $25.40 billion during the same period of the previous fiscal year. This represents a growth of approximately 19.5 percent year-on-year.
According to economists, the increase in remittance flow is attributed to a greater willingness among expatriates to send money through banking channels, strict monitoring to control hundi (illegal money transfer), and a relatively market-based dollar exchange rate. Furthermore, with the expansion of new labor markets in various countries including the Middle East, Europe, and Malaysia, the positive trend in remittances is expected to continue in the coming months.
Bankers state that a decline in reserves once led to significant instability in the dollar market. However, with the current increase in export earnings and remittances, the situation is much more under control than before. Moreover, Bangladesh Bank is not selling dollars in the market as frequently as it used to, which has somewhat eased the pressure on foreign exchange reserves.
However, there is upcoming pressure from fuel imports, loan repayments, and foreign debt servicing for large infrastructure projects. In this situation, stakeholders believe that maintaining the flow of remittances and export earnings is now the biggest challenge to keep the reserve situation stable.
What is ACU?
The Asian Clearing Union (ACU) is a regional arrangement for settling import-export transactions among several Asian countries. Bangladesh, India, Pakistan, Iran, and a few other countries are members. Member countries settle their import liabilities in dollars every two months.
In Bangladesh’s case, due to higher import expenditures, a large amount of dollars must be paid almost every time. Consequently, ACU bill payments have a significant impact on reserves.
Last March, approximately $1.37 billion was paid for import liabilities for the January-February period. At that time, the total reserves decreased to $34.10 billion. And according to the IMF’s BPM-6 calculation, reserves stood at $29.38 billion.