World Bank Budget support helps raise reserve

The country’s falling forex reserve managed to make a modest turnaround on Wednesday after Bangladesh received $507 million from the World Bank as budget support.

The country’s forex reserve now stands at $30.36 billion after it hit seven-year low at $29.77 billion following the latest Asian Clearing Union (ACU) payment of $1.88 billion earlier this month.

Bangladesh Bank Executive Director and spokesperson Md Mezbaul Haque confirmed this to media on Wednesday.

“We’d sought loans from different lending agencies. In the mean time, an installment of the World Bank has been added to the reserve. As a result, the reserve has again surged to $30.36 billion,” Mezbaul said.

He also hoped that the reserve will rise further as the country is expecting more budget support from some other agencies.

“We hope that our reserve will soar to $32 billion by next June once the rest of the budget supports are available,” he said.

Bangladesh has been suffering from a dollar crisis since the start of the Russia-Ukraine war that shot up energy, food and fertiliser price across the globe.

Despite different attempts to address the crisis, including restricting fancy goods import, It is still struggling with the forex reserve pressure.
The central bank has to sell dollar continuously from its reserve to help pay high import bills, resulting in falling a continuous fall in forex reserve.

Before the latest fall to $29.77 billion, the serve slipped below $30 billion mark in April 2016, which crossed $30 billion again at the end of 2016 and crossed $33 billion in June 2017.

During the corona pandemic, it hovered around $32 to $33 billion. In August, the reserve first crossed $48 billion.

According to IMF standard, the amount of usable reserve stood at $24.27 billion excluding $5.5 billion earmarked for different fund.

The IMF last March set a floor of $22.947 billion in net reserves, which Bangladesh could not meet. It raised the floor to $24.462 billion for June. Also, it has set $25.316 billion as floor target for September and $26.411 billion for December.

Bangladesh Bank is in search of foreign sources to increase the net reserves by June as per the conditions of the IMF.

The government has sought $400 million budget support from Asian Infrastructure Investment Bank, $320 million from JICA and $100 million from South Korea, which the Economic Relations Division is trying to get by next June.

If these loans are available, an additional $1 billion will be added to reserves by next June.

In a SWIFT message on 3 May, the central bank gave its approval to the Federal Reserve Bank of the United States to process the ACU payment.

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.

The central bank cleared $1.05 billion in import bills to ACU in March, which brought down the reserves to $31.15 billion.