The country’s foreign exchange reserve fell below USD 31 billion in April due to a sharp decline in remittance inflow, according to central bank authorities.
The International Monetary Fund (IMF) set a net reserve threshold objective of USD 24.46 billion by June of next year, but this decline in foreign exchange reserves has made that goal unclear to achieve.
Sources at the Bangladesh Bank (BB) claim that as of April 30, the total stock of the nation’s foreign currencies was USD 30.93 billion, down USD 13.08 billion from the same period last year, reported the Financial Express.
The recent decline in the reserve, according to BB authorities, is primarily the result of two factors: increasing sales of the dollar to banks to settle their LC-related payments in the face of a forex shortage and relatively lower profits from the source of remittance in April.
The central bank sold a total of USD 11.79 billion through to April 27 of the current fiscal year, compared to USD 7.62 billion over the full fiscal year of 2021–2022. The reserve was under stress as a result.
“But the less-than-expected level of earnings from remittance in the just-passed month, which is normally considered the peak remittance time,” the official was quoted as saying by FE.
Bangladeshi nationals who work abroad sent back to their home country USD 1.68 billion in April, a fall of 16.76% from the US$ 2.02 billion received by the USD 400 billion-plus economy in March.
Meanwhile, exporters will be allowed to encash their export revenues at Tk 106 instead of the current Tk 105, and Bangladeshi expatriates working overseas will receive Tk 108 per dollar instead of Tk 107, according to the most recent decision of foreign-exchange dealers and banks.
As a result of the government’s 2.5% incentive, the remitters will really receive Tk 110.50 for every USD sent.
According to Dr. M. Masrur Reaz, the head of a regional think tank called Policy Exchange of Bangladesh, the effort to devalue the taka relative to the US dollar by increasing the exchange rate is highly anticipated, given the macroeconomic climate at the moment.
He claimed that there are numerous conversion rates and that there are still significant disparities between them, which could cause confusion for remitters when they are sending money home.
The discrepancy “needs to be minimized,” he said, and policymakers ought to seek to introduce two rates that the market would determine.
The economist proposed stepping up efforts to combat the ‘hundi,’ an unofficial avenue for unregulated but often utilized money transfers.