Bangladesh’s foreign exchange reserves have once again crossed the $37 billion mark, supported by stronger remittance inflows and greater stability in the foreign exchange market.
According to the latest Bangladesh Bank data, the country’s gross foreign exchange reserves stood at $37.6 billion at the end of Wednesday (August 12). Under the International Monetary Fund’s BPM6 accounting method, reserves stood at $32.26 billion.
At the beginning of the month, on August 2, gross reserves were $36.47 billion, while the BPM6 figure was $31.65 billion. This means reserves have increased significantly under both measures during the month.
However, the entire gross reserve is not available for use. Net or usable reserves, after accounting for short-term liabilities and other obligations, are considered more important for assessing the country’s external position.
Bangladesh Bank internally calculates usable reserves by excluding certain items, including the IMF’s SDR holdings, foreign currency clearing accounts of banks and ACU-related liabilities. The central bank does not officially publish this figure.
According to Bangladesh Bank sources, the country’s usable reserves currently stand at around $29 billion. Assuming average monthly import payments of $5 billion, the reserves would be sufficient to cover more than five and a half months of import costs. Generally, reserves equivalent to at least three months of import payments are considered a safe level.
Bangladesh’s reserves came under severe pressure during the final years of the previous Awami League government amid capital flight and sluggish remittance inflows. At one point, usable reserves fell below $14 billion.
The country’s reserves reached a record high of more than $48 billion in August 2021, when the exchange rate stood at Tk84.20 per US dollar. Reserves subsequently declined amid various factors, including irregularities in lending and capital flight.
By August 5, 2024, when the Awami League government fell, gross reserves had dropped to $25.92 billion, while the BPM6 figure stood at $20.48 billion. At the same time, volatility in the foreign exchange market pushed the dollar rate above Tk120, prompting authorities to impose various restrictions on imports.
After the interim government took office, the exchange rate was gradually moved toward a market-based system. Authorities also took several measures to boost remittance inflows and gradually eased import restrictions.
The comparatively liberal trade and foreign exchange policies helped remittance inflows increase, contributing to the recovery of the country’s reserves.
When the current BNP government came to power, the country’s reserves stood at around $34 billion, while the BPM6 figure was approximately $30 billion.
