Country scales IMF-set forex reserves target

JUBAIR HASAN
| Published: December 28, 2023 22:54:19

Bangladesh scales the IMF-set net US$17 billion foreign-exchange (forex) reserves target for December, as the central bank has mopped up dollars from liquidity-strapped banks and received substantial remittances.
Official sources said Thursday the Bangladesh Bank (BB) fulfilled the target of net international reserves (NIR) worth US$ 17.0 billion set by the International Monetary Fund (IMF) for up till December as part of its $4.70-billion loan to the forex-hungry economy.

As the inflow of the foreign currencies has been rising in recent days, the gross forex reserves of the country went past $27.0 billion as on December 28, 2023, the sources said.
Seeking anonymity, a BB official said the gross size of reserves was $26.82 billion on December 27, 2023, which increased to $27.118 billion the following day.
“It’s very much encouraging. The most important part is that we (BB) finally reached today the NIR target set by the IMF. Now the NIR rose to $17.18 billion,” the central banker said.
About the rise in the forex coffers, the official said they had received increased remittances in this month. Simultaneously, the country recently received foreign exchange, the greenback in particular, from global lenders like the IMF, the World Bank and the Asian Development Fund (ADB), which in fact, helps raise the reserve volume.
On the other hand, the demand for forex keeps dropping in recent times because of the central bank’s belt-tightening measures amid dollar dearth, the official added about the ways they managed to shoot the mark.
Another BB official, who also preferred not to be quoted by name, says the central bank changed its strategy in maintaining reserves and started buying increased volumes of the greenback from the commercial banks, especially those facing severe stress in maintaining local-currency obligations.
The central banker mentions that the liquidity pressure is comparatively higher in some of the unconventional banks which have a good share of forex that they earned in receiving more remittances.
And, the BB has started buying more dollars from the Islamic banks in a move to reduce the current stress on their local-currency management that will help them adjust the year-end balance sheet taking care of the mandatory banking requirements like CRR and SLR.
“With the changed strategy, the BB is improving the country’s reserve situation and the shortfalls of local currency hurting the credit-starving banks. I think it is a win-win situation for the economy,” he says as the central bank laughs the last laugh in helping the country maintain creditworthiness as per loan tags.
According to the BB statistics, the central bank purchased foreign currencies amounting to $ 7.94 billion in the financial year 2020-2021. Since then, the banking regulator has changed its plan and kept decreasing the sourcing of the greenback from the market as the pressure on the forex market had appeared because of post-covid economic shocks followed by the Russia-Ukraine war that disrupted the global supply chains.
The data showed the BB bought forex equivalent to $ 210 million in FY’22 and $193 million in FY’23.
In the first four months of the current fiscal year (FY’24), the central bank only purchased $100 million, but in the last three days until December 28, 2023, the BB snapped up more than $700 million from the banks, the official data showed.
In FY’24, the BB has so far bought more than $1.0 billion from the commercial banks.
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