$1.1b ACU payment due tomorrow, reserves to slip to $30b again

The country's foreign exchange reserves are set to come down to $30 billion again after clearing the import bills of $1.1 billion with the Asian Clearing Union (ACU) this week.

The forex reserves stood at $31.19 billion as of June 30. As such, the reserves after the payment will be slightly more than $30 billion.

The reserves fell below $30 billion in May, but they bounced back on the back of budgetary support from various development partners, including the World Bank and the Asian Development Bank. 

Md Zakir Hossain Chowdhury, acting spokesperson for the central bank, said that the payment will be made on Wednesday.

The ACU payment gateway covers monetary transactions by its nine member countries – Bangladesh, Bhutan, India, Iran, the Maldives, Myanmar, Nepal, Pakistan, and Sri Lanka – for regional imports. The bills are cleared every two months.

Earlier in May, the Bangladesh Bank cleared $1.18 billion in import bills to the Union, which brought down the reserves to $29 billion.

A senior official at the central bank said that the balance of imports and exports from ACU member countries is cleared every two months. Accordingly, the balance of the amount imported and exported in May and June should be paid by the 10th of this month.

"We will make it early. Many say that we are late in making payments or have problems. This is a misconception. There is no default on these country-to-country payments. We always complete the payment within the allowed time," he added.

Pointing out that ACU's payment amount is decreasing due to a drop in imports, the official said that Bangladesh used to make import payments of up to $8 billion a month. However, the payments fell to $5 billion in May this year due to various actions taken by the central bank.

"We are seeing an impact of this in the case of ACU payments. We had to pay about $2 billion in ACU payments for imports during May-June last year. It now needs to be slightly over $1 billion for the same period this year due to falling imports," he added.

In August 2021, the country's reserves hit a record high of $48 billion. Since then, it has been on a gradual fall with some fluctuations due to rising imports and falling remittances and export earnings amid the reopening after Covid-19 restrictions. The situation deteriorated further following the onset of the Russia-Ukraine war.

Meanwhile, as part of efforts to maintain standard foreign exchange reserves, the government-imposed bans on luxury items in the middle of last year, which helped decrease letter of credit openings.

According to the central bank, LC openings fell by more than 25% to $62.4 billion in the nine months (July–May) of FY23, compared to $83.58 billion in the same period last year.

"While our imports decreased throughout FY23, we have had to pay additional import bills due to global hikes in prices amid the Ukraine-Russia war," a senior Bangladesh Bank official told TBS.

Bangladesh's merchandise exports grew 6.67% to $55.55 billion in the fiscal 2022–23, compared to $52.08 billion in the same duration of the previous fiscal year, according to data released by the Export Promotion Bureau (EPB) on Monday.

Data from the central bank reveals that Bangladesh received a total of $21.61 billion in remittances in FY23, marking a 2.75% increase compared to the previous fiscal year's $21.03 billion.

Besides, net foreign direct investment (FDI) fell by 35.56% in the December quarter of 2022.