After Settling ACU Bills, Reserves See a Decline

 

Bangladesh Bank has bolstered its foreign exchange reserves by purchasing dollars from banks. However, it faced challenges in meeting the conditions set by the International Monetary Fund (IMF) by the end of 2023. The reserves experienced a further decline after settling import duties through the Asian Clearing Union (ACU) in the new year. According to the IMF accounting system, the reserves have diminished to $20.38 billion or 2,038 million dollars. Nevertheless, the actual or net reserves are currently less than $16 billion. Central bank data reveals that $127 million has been paid for the November-December bill. The ACU serves as an inter-regional settlement system between central banks for imports and exports among nine Asian countries. However, Bangladesh's transactions with other nations are promptly settled. The ACU member countries include Bangladesh, India, Iran, Nepal, Pakistan, Sri Lanka, Myanmar, Bhutan, and Maldives. Sri Lanka has been recently removed from this list due to its failure to repay debts. Among ACU member countries, India receives more dollars than it pays out, with most countries spending more dollars than they earn. Banks regularly deposit these import costs with the central bank, contributing to the increase in reserves. As of December 31, the total reserve in the central bank was $26.81 billion, and the actual reserve was approximately $17 billion. However, the IMF's target stipulated that the actual reserves in December should have been $17.78 billion. In July 2022, Bangladesh sought a loan from the IMF due to a deficit in the financial and current accounts amid a dollar crisis. After six months, the IMF approved a $4.7 billion loan on January 30 of the following year. Bangladesh received $47.63 million in the first installment on February 2 and $68.10 million in the second installment last December. The IMF attached several conditions, including maintaining net reserves as per the loan approval, along with various financial sector reforms.