ACU bill drops further to $1.1b for March

The country's foreign exchange reserve will stand at around $31 billion after the $1.1 billion Asian Clearing Union (ACU) payment in the first week of March, according to central bank sources.

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.

According to Bangladesh Bank data, Bangladesh's trade with other ACU members has been plummeting since July last year. The country maintained the downturn in January and February bills too – which will be cleared in March.

Bangladesh had to pay about $1.2 billion for imports from the regional countries in November-December last year – lower from the previous $1.32 billion for September-October.

According to the central bank, the ACU bill of imports was $1.96 billion in May-June last year, which decreased to $1.75 billion in July-August of 2022.

Bangladesh Bank Spokesperson Md Mezbaul Haque acknowledged a looming ACU payment but declined to mention the amount. He termed the ACU payment and subsequent reserve fall "business as usual" and said "there is nothing to discuss separately".

The country's gross reserve stood at $32.33 billion on Tuesday, the central bank said. The forex reserve crossed the $31 billion mark for the first time on 1 September 2016 and reached $48 billion in August 2021.

According to international standards, a country is considered in a comfort zone if it has enough forex reserves to cover imports for the next three months. According to the gross reserve calculation, Bangladesh's reserve covers import bills for five months.

However, as per the International Monetary Fund (IMF) formula, the Bangladesh Bank will have to exclude a total of $8 billion from the gross reserve.

The exclusion includes $6 billion of foreign currency loans to local banks known as the Export Development Fund (EDF), $2 billion deposits with state-owned local banks, deposits with IDB Group fixed-income securities below investment grade, a loan to Sri Lanka and other foreign currency assets in non-convertible currencies.

In line with the IMF calculation, the net reserve after the ACU payment will be more than $23 billion, which will cover import bills for at least 4 months.

Dollar sales from the forex reserve to state-owned banks are attributed to Bangladesh's fast-depleting reserve.  

The central bank does this to keep the dollar market stable. So far in FY23, around $10 billion has been sold from the reserve, while the amount was $7.62 billion in FY22. 

However, the Bangladesh Bank in FY21 bought around $8 billion from banks on the back of plummeting imports and a high remittance inflow amid the pandemic.

A top official of the central bank said recession fears are looming all around the globe and many countries are facing their reserves depleting fast.

"So far, we have handled the situation quite well. Hopefully, we will be fine in the coming months as well," he said, wishing not to be named.

Stating that more than $36 billion of import bills have been cleared in the July-December period of the current fiscal year, the official said the import bills were $2.5 billion more in the corresponding period of the previous year. 

According to the official, imports have been reined in due to various measures taken by the central bank. On the contrary, the country's exports have increased by more than $500 million compared to the previous period. In addition, remittances up to December amounted to $10.5 billion.

"The bottom line is, the forex reserve has not fallen that much to worry about," he added.

Earlier, the IMF projected a faster recovery of Bangladesh's external sectors with the forex reserve reaching $53.1 billion by FY27.