Forex reserves rise by $300 million in a week

Bangladesh's foreign currency reserves went up by $318 million in the span of a week to hit $19.53 billion on June 19, central bank figures showed.

It was $19.21 billion on June 12.

The latest upward movement of the reserves will give much-needed relief to the US dollar supply, which has squeezed sharply in the last couple of years amid higher outflows against inflows.

The rally might continue in the coming weeks as the country is set to receive $1.65 billion from the International Monetary Fund (IMF) and the World Bank before the end of this month.

The IMF may release $1.15 billion in the third instalment of its $4.7 billion loan in the last week of June while the WB is going to provide $500 million in budget support. This may send the reserves above $21 billion.

The latest improvement in the forex reserves situation comes a month after the central bank relinquished its control over the rate-setting mechanism and introduced a more flexible exchange rate regime.

On May 8, the banking regulator introduced the Crawling Peg Mid-Rate to facilitate the purchases and sales of foreign currencies, allowing banks to trade US dollars freely at around Tk 117.

Today, the highest interbank exchange rate stood at Tk 118 per dollar.

The reserves have been declining sharply since the beginning of the Russia-Ukraine war as the conflict sent the prices of commodities such as oil and gas higher, hurting import-dependent nations such as Bangladesh.

However, mismanagement in the forex market, frequent policy changes by the central bank, and the gap between the official exchange rate and the unofficial one are also to blame. 

Since August 2021, forex reserves have fallen by $24 billion.