Declining foreign exchange reserves in Bangladesh: How to stop it

Declining foreign exchange reserves in Bangladesh: How to stop it

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According to the International Monetary Fund (IMF) calculation methodology, Bangladesh’s ‘gross foreign exchange reserves’ stand at US$20.90 billion, while the net reserves have fallen below US$17 billion, said a report by Prothom Alo on October 5, 2023 Has gone. Zahid Hussain, former chief economist of the World Bank’s Dhaka office, expressed concern that if this rate of decline continues, the reserves could even fall to zero.

The Bangladesh government claimed that reserves reached $48.06 billion in August 2021 but the IMF ignored that claim. The global lender said $7.5 billion to be accessed through the Export Development Fund (EDF) should be deducted from the claimed amount of reserves. Also to be deducted from the reserves are $200 million given by Bangladesh to Sri Lanka, the money spent for dredging the Rabanabad channel of Pera port and the loan given to Biman Bangladesh Airlines for purchasing airplanes. Will have to be reduced.

The top leadership of Bangladesh Bank and government ignored IMF’s objections for two years. But last July Bangladesh Bank had to accept the latest method of calculating reserves, BPM 6, as one of the conditions for receiving the second tranche of the IMF’s $4.7 billion loan.

The government took some imprudent decisions in the last two years as it was overwhelmed by the obsession of showing “increased foreign exchange reserves” following the old BPM5 calculation method. But the government had no reason to give loans through EDF, spend money for dredging of the Rabnabad channel and lend money to Biman to buy airplanes from the reserves, if it had followed the norms. But news reports published in 2021 and 2021 will reveal that the top leadership of the government was repeatedly saying that Bangladesh was maintaining such high foreign exchange reserves just like that. At that time I wrote columns in newspapers arguing that this concept was illogical. But who will pay attention to such things?

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