Reasons behind Bangladesh’s dollar crisis

The amount of foreign currency held by the country's commercial banks increased to a 14-month high in February as a result of increased remittance and export profits as well as import restrictions. From $4,849.28 million in January, the gross foreign currency balance with banks increased to $5,240 million in February. According to data from Bangladesh Bank (BB), the gross holding of foreign exchange by banks climbed for four straight months, reaching $4,708 million in December, $4,708 million in November, and $4,505 million in October.

Bangladesh Bank is going to implement the BPM6 method in the calculation of foreign currency circulation from next June; It will be officially announced in the monetary policy for the second half of the year in June. Bangladesh took the decision to implement the International Monetary Fund (IMF) accounting system BPM6 after receiving the first installment, as a part of fulfilling the requirement for the loan.

Following the central bank's $1.05 billion settlement of import bills with many Asian nations, Bangladesh's foreign exchange reserves fell to a six-year low of $31.15 billion, according to official data. As a result, the reserves are down around 30% from the $44.14 billion recorded in March last year. The reserves are at their lowest level since the 2016–17 fiscal year when they were at $33.49 billion. 

In order to meet performance standards specified by the International Monetary Fund (IMF) and receive the second tranche of the $4.7 billion loan package, the Bangladesh Bank must rebuild its foreign exchange reserves by more than $3 billion in four months, or by June. The Bangladesh Bank has pledged to expand its net reserve to four months' worth of potential imports by FY26 through prudent aggregate demand management policies, more flexible currency rates, and structural reforms.

According to the BPM6 standard of the International Monetary Fund, Bangladesh must maintain net international reserves of at least US$24.46 billion in June of this year. Both of the figures will be examined in the first two inspections, although the reserve position must be at least $26.81 billion in December of this year.

Exchange rate caps are primarily to blame for Bangladesh's current dollar issue, which if left unaddressed might worsen into a much more serious economic disaster. This is the most recent forecast provided on Sunday by economists and financial experts in the aftermath of import restrictions and spiraling consumer prices caused by the nation's declining foreign exchange reserves.