Friday, June 14, 2024

Forex reserve balloons to $17b as idle dollars pile up

BB purchases $428m more in October
The country’s foreign exchange reserve on Tuesday crossed $17-billion mark after Bangladesh Bank purchased fresh US dollar worth $428 million in the first 21 days of this month to keep the inter-bank foreign exchange market stable, said officials of the central bank.
Higher export earning against a lower import payment in the last few months, and higher inward remittance this month also played a significant role in increasing the country’s foreign exchange reserve, they said.
The BB purchased the dollar worth $1,495 million between July 1 and October 21 of this financial year which played role in breaking the previous records of the country’s foreign exchange reserve, they said.
According to the BB data, the foreign exchange reserve reached $17.10 billion on Tuesday from $16.93 billion on Monday.
A BB official told New Age on Tuesday that the central bank had purchased significant amount of dollar this month from the scheduled banks to offset higher supply of foreign exchange on the market on the occasion of Eid-ul-Azha.
Higher inflow of remittances contributed to increase in the supply of foreign exchange on the local market due to the Eid festival, he said.
He said the huge amount of forex reserve had become idle fund as the investment sector was now passing a stagnant situation due to ongoing political violence.
The forex reserve will increase more in the months to come if the imports do not increase in accordance with the required demand from the industrial sector, the official said.
The BB data showed that the central bank had purchased $100 million on October 21, $94 million on October 10, $90 million on October 8, $81 million on October 7 and $63 million on October 2 of this month. The BB bought the dollar from the banks at Tk 77.75 a dollar.
The central bank continued to intervene in the foreign exchange market to protect the interests of exporters and migrant workers by keeping stable the exchange rate of the local currency taka against the US dollar, the official said.
The BB data showed that the expatriate Bangladeshis had remitted a total of $799 million in the first 18 days of this month.
On August 13 of this year, the forex reserve crossed $16-billion mark for the first time in the history of Bangladesh.
The forex reserve, however, came down below $16 billion after the government paid Asian Clearing Union bills in September. But on September 22, the forex reserve again crossed $16 billion.
Bangladesh is now in second position in holding forex reserve in the SAARC countries. India tops the list holding $280 billion forex reserve and Pakistan secures
the third position with $9.2 billion, another BB official said.
He said the country had been enjoying available forex reserve since the beginning of the FY13 as the import declined significantly amid political unrest.
Under the circumstances, the BB started to intervene in the foreign currency market after the Bangladeshi currency had fallen to around Tk 84 a dollar in the first half of 2012 from around Tk 71 in the previous year, another BB official said.
But, the value of the dollar started to decline from late last year because of fall in import payment amid slowing businesses and lack of import and it came down below Tk 80 in December 2012, the official said.
After the BB bought around $4.53 billion in the FY13, the taka has become slightly stable at around 77.75 a dollar for the last few months, he said.
According to international standard, a country needs to have forex reserve enough to meet import bills for three months.
The BB official said that the country would be able to meet import bills for six months by using the $17 billion forex reserve.
Former BB governor Salehuddin Ahmed earlier told New Age that the robust foreign exchange reserve would not bring any positive impact on the macro-economic condition.
The foreign exchange is usually used in the trade, but the country’s business sector is now passing a difficult situation due to a lower investment trend, he said.
He said, ‘The buffer foreign exchange reserve indicates that the access liquidity in the banking sector has soared as the businessmen are not taking loan from the banking sector to expand their investment.’

-With New Age input

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