Foreign Currency Reserves Fall Below $30B Again

Bangladesh's economy is facing challenges, necessitating focused strategies to tackle issues like inflation and reserve shortages. The Centre for Policy Dialogue (CPD) emphasized the need for greater transparency and inclusiveness in the upcoming FY24 budget. While cautioning against reducing subsidies, CPD stressed the importance of preserving food security by maintaining subsidies in the agricultural sector.

Bangladesh experienced a decline in its foreign currency reserves, slipping below the $30 billion mark for the second time in May. The reserves initially dropped to $29.77 billion on May 7 as import bills worth $1.18 billion were cleared by the Bangladesh Bank. However, two days later, the reserves increased to $30.36 billion with the assistance of loans provided by the World Bank.

Bangladesh's banking sector is gradually recovering from the severe stress it faced due to a shortage of foreign currencies in the local money market since July last year. According to the Association of Bankers, Bangladesh (ABB), the forex supply situation has started easing due to prudent policy support from the central bank, resumption of transactions with overseas corresponding banks, and other relevant factors.

Bangladesh's foreign exchange reserves received a boost, reaching $30.36 billion, after the World Bank provided $507 million to the government. This move gave some breathing space to the economy, which has been under stress due to higher imports against lower-than-expected export earnings and remittances. The reserves declined sharply on May 7 to $29.77 billion due to the clearing of import bills to the Asian Clearing Union.

The World Bank has cited the widening gap between formal and informal exchange rates as a factor contributing to the sharp fall in foreign exchange reserves in Bangladesh. The country's reserves declined by 29.45% to $29.77bn over a year, according to Bangladesh Bank data. In its regional economic update titled "Expanding Opportunities: Toward Inclusive Growth," the World Bank said a one percent deviation between the formal and informal exchange rate shifted

Bangladesh's foreign exchange reserves have dropped below the $30 billion mark, following the clearance of import liabilities worth $1.18 billion through the Asian Clearing Union mechanism, according to officials. The country's reserve position is a matter of concern, as it faces difficulties meeting the International Monetary Fund's net international reserve target of $24.46 billion by June