Exchange Rates Stabilize Under New Crawling Peg System

Interbank foreign-exchange turnover, which declined by nearly 9.0% year-on-year in the first nine months of FY 2023-24, is showing signs of recovery with the introduction of the crawling-peg system. During July-March FY 2023-24, forex turnover amounted to $16.7 billion, down from $18.3 billion in the corresponding period of FY 2022-23, indicating liquidity challenges in the market.

Bangladesh's foreign exchange reserves recently dropped below $21 billion to $20.46 billion following the clearance of $1.42 billion in import bills through the Asian Clearing Union (ACU). As of June 30, the reserves were reported at $21.78 billion, according to Bangladesh Bank data. The ACU facilitates payments for intraregional transactions among eight countries, including Bangladesh. The reserves calculation adheres to the International Monetary Fund's (IMF) methodology.

Bangladesh's customs authority has raised the dollar value used for imposing import duties, increasing government revenue but also raising costs for consumers. Since June 23, the dollar rate for customs duty has been fixed at Tk 117.94, up from Tk 110 in mid-May, marking an increase of Tk 8.93 in just 42 days.

During Prime Minister Sheikh Hasina’s upcoming visit to China from July 8-11, accelerating the use of Chinese Yuan for trade will be a key focus, amid Bangladesh's ongoing dollar crisis. Although Bangladesh Bank approved Yuan-denominated transactions in 2022, uptake has been slow. This visit aims to boost Yuan transactions, critical for enhancing bilateral trade and addressing economic pressures.

For the first time, Bangladesh Bank disclosed the Net International Reserves (NIR), which now stand at $16.77 billion. This figure, shared by central bank spokesperson Md Mezbaul Haque, represents the readily available cash derived from gross reserves, calculated by excluding short-term liabilities according to the IMF's BPM6 formula.

Bangladesh has successfully met the IMF-set target for its net international reserves (NIR), achieving $15.80 billion by June 27, 2024, surpassing the required $14.78 billion. This accomplishment comes after strategic efforts by the Bangladesh Bank to enhance forex reserves through increased remittance and export earnings, alongside prudent management of US dollar sales to commercial banks and utilization of export development funds. These measures, combined with inflows from multilateral agencies like the World Bank and Asian Development Bank, have bolstered reserves. The achievement secures continued access to IMF funding, crucial for stabilizing Bangladesh's forex reserves amid global economic challenges.