The country’s foreign exchange reserves have come under pressure after higher external payments against import of oil and construction materials for mega projects.
The reserves shrank on Wednesday after a routine payment to the Asian Clearing Union (ACU) against imports during the March-April period of the year, officials said.
After the payment, the country’s forex reserves reached $30.99 billion on the day from $32.19 billion of the previous working day, according to the central bank’s latest statistics. It was $31.02 billion on Thursday.
The highest $33.68 billion reserves were recorded on September 05, 2017.
Bangladesh will be able to meet more than five months import payment bills with the existing reserves, the officials added.
The reserves are under stress because of higher import payment obligations, particularly for petroleum products, construction materials, capital machinery for power plants and fertiliser, said the officials.
The import of LNG (liquefied natural gas) has been contributing to the forex reserve pressure in the recent months, they added.
The country’s overall imports have advanced by more than 7.0 per cent in the first nine months of the current fiscal, following higher imports of intermediate goods and oil.
The actual import in terms of settlement of letters of credit (LCs) rose to $41.22 billion during the July-March period of FY 19 from $38.41 billion in the corresponding period of the last fiscal, the central bank data showed.
Import of intermediate goods such as coal, hard coke, clinker and scrap vessels jumped by 39.42 per cent to $4.16 billion during the period from $2.98 billion in the same period last year.
The purchase of construction materials pushed up the overall import payments in the first nine months of the fiscal, another BB official explained.
He also said mega infrastructure projects, including Padma bridge, Rooppur Nuclear Power Plant (NPP), metro-rail and Dhaka Elevated Expressway account for the lion’s share of intermediate goods, he added.
Higher import of oil also drove up the overall import expenses during the period under review, according to the official.
The import of petroleum products, including liquefied natural gas (LNG) soared by 25.43 per cent to $2.81 billion in the first nine months of FY 19 from $2.24 billion in the same period last fiscal.
He predicted the upward trend in oil import will continue in the coming months owing to the diversified use of gasoline products-in power generation, for instance.
The central bank has so far sold more than $2.0 billion from the reserves directly to the commercial banks as liquidity support helping them settle their import payment obligations this fiscal.
“We’re providing such foreign currency support to the banks for meeting import payment bills, particularly for oil, capital machinery for power plants, LNG and fertiliser,” the central banker said.
A total of $2.16 billion has been sold since July 01 of the FY 19 to the scheduled banks as part of the BB’s ongoing support.
“It’s a temporary phenomenon,” a central bank executive director told the FE Friday.
He insisted that the reserves situation would improve gradually in the coming months following a steady growth in export earnings alongside an uptrend in remittances.
“We expect the inflow of remittance to exceed $16 billion by the end of this fiscal,” he said.
The central bank has already remitted $1.24 billion to the ACU headquarters in Tehran in line with the existing provisions of the union.
The amount of ACU payment came down to $1.24 billion during the period under review from $1.15 billion, mainly due to lower imports from the ACU member countries, especially India.
Bangladesh imports consumer items such as cotton, raw materials and capital machinery from ACU member countries, including India, the official added.
The ACU is an arrangement involving Bangladesh, Bhutan, India, Iran, Myanmar, Nepal, Pakistan, Sri Lanka and the Maldives and intraregional transactions among the participating central banks are made on a multilateral basis.
The union started its operation in November 1975 to boost trade among the member countries.
Bangladesh and Myanmar joined the union as the sixth and seventh members in 1976 and 1977 respectively.