Govt to pay 3-year high ACU bill of $2b next week

Bangladesh is set to pay nearly $2 billion to the Asian Clearing Union (ACU) – marking the highest bi-monthly ACU payment in three years – covering import payments for May and June.

According to a senior policymaker at the central bank, this payment will be made next Monday. As of yesterday, the country's foreign exchange reserves stood at $26.69 billion (calculated under BPM6 standards), meaning that even after the ACU payment, reserves will remain above $24.5 billion.

Bangladesh clears its ACU bills every two months. The previous ACU payment of $1.88 billion was made on 7 May, covering March–April imports. Despite that, reserves then remained above $20 billion under BPM6 calculations.

The ACU, headquartered in Tehran, facilitates regional payments among nine countries: India, Bangladesh, Bhutan, Iran, the Maldives, Myanmar, Nepal, Pakistan, and Sri Lanka.

This recent surge in imports is being interpreted positively by bankers, who see it as an indication of improved foreign exchange liquidity in the banking sector.

According to central bank data, Bangladesh last paid $1.96 billion in July 2022 for imports during May–June of that year. Since then, ACU payments have been on a declining trend, with bi-monthly payments staying below $1.3 billion throughout 2023. 

The amounts began rising again from the September–October 2023 cycle, reaching the $2 billion mark this May–June, the highest in the past three years.

A senior central bank official explained that before 2022, Bangladesh would routinely pay around $2 billion per ACU cycle. However, due to the dollar crisis, the central bank imposed various restrictions on imports, which led to a decrease in both imports and ACU payments. 

Now, with more stable foreign reserves and reduced exchange rate volatility, imports are gradually increasing again, including from ACU countries, raising the payment amount.

Another policymaker noted that despite the rise in imports, reserves have not declined. At the end of July last year, reserves were $20.39 billion under BPM6. Since then, remittance inflows have grown by 27%, and exports by 8.5%, helping maintain reserve stability. 

Additionally, Bangladesh recently received $1.35 billion from the IMF, about $900 million from the Asian Development Bank (ADB), $350 million from the Japan International Cooperation Agency (JICA), and around $400 million from the Asian Infrastructure Investment Bank (AIIB), all of which have helped boost reserves. Compared to recent years, the foreign reserve position is now considerably stronger.

Central bank data also shows that in the July–April period of the current fiscal year, the opening of import LCs increased by 2.98% compared to the same period the previous year. Imports of consumer goods, industrial raw materials, and other items rose, while imports of capital machinery declined by 27.5%. Imports of intermediate goods and petroleum also dropped.

Asked about the reason behind the increased ACU payments, a managing director of a private bank explained, "Import demand from Bangladeshi consumers remains high, making continued imports essential."

A large portion of Bangladesh's imports come from ACU countries, particularly essential goods and raw materials for export industries, mostly sourced from nearby nations. As a result, obligations to those countries have risen. 

However, he added, Bangladesh needs to further increase overall imports, particularly capital machinery imports, which continue to decline and reflect a sluggish investment environment in the country.