Forex reserves decline by $133 million in a week

Bangladesh's foreign currency reserves declined by $133 million to $19.83 billion on May 8 in the span of a week, central bank data showed.

The reserves stood at $19.96 billion on April 30. The forex figure is based on the balance of payments and investment position manual (BPM6) of the International Monetary Fund (IMF).

Wednesday's figure means the reserves have stayed at less than $20 billion for nearly a month as inflows have not improved in line with outflows.

Since the reserves are not picking up, the IMF has drastically slashed the Net International Reserves (NIR) requirement for Bangladesh for the fourth tranche of the $4.7 billion loans.

The Washington-based multilateral lender had given the country a target to maintain $20.11 billion for June. But after its 15-day review mission in Dhaka that ended on Wednesday, it has reduced the NIR threshold for the central bank to $14.76 billion.

It came as exports and remittances inflows are not showing much improvement.

The country shipped products worth $3.91 billion last month, down 0.99 percent year-on-year. However, remittance inflow rose 21.31 percent to $2.04 billion thanks to Eid-ul-Fitr as the country's migrant workers typically send more money home ahead of the major religious festival for Muslims.

Because of higher commodity prices driven by the supply chain disruptions caused by the coronavirus pandemic, the Russia-Ukraine War, and the latest Middle East Crisis, the forex reserves of Bangladesh, an import-dependent nation, have been declining since August 2021 from the record level.

According to the IMF manual, gross foreign reserves include gold, cash US dollars, bonds and treasury bills, reserve position in the IMF, and special drawing rights holdings.

The NIR is defined as reserves assets minus reserve liabilities to residents and non-residents, including commitments to sell foreign exchange arising from derivatives and all credit outstanding with the IMF.

Thus, the NIR is usually lower than the gross reserves.