The net foreign exchange reserves in Bangladesh, as per International Monetary Fund guidelines, fell to $13.76 billion, with the gross reserves dropping to $18.26 billion on May 12, marking a 10-year low, according to Bangladesh Bank data.
According to the data, the gross foreign exchange reserves reached the current level on the day from $19.97 billion on April 30 and $21.86 billion on December 28, 2023.
The current volume was lowest after January 2014 when it was at $18.11.
Experts have criticised the central bank for not devaluing the local currency earlier, as it had artificially maintained the rate, which has now plunged.
The sudden and sharp devaluation of the taka by the central bank has caused chaos in the currency market and among businesses, they said.
Holding the dollar rate artificially was one of the reasons behind the fall in foreign exchange reserve, they said.
They said that money laundering had also contributed to the draining of forex reserves.
The interbank dollar rate soared to Tk 117.5 each after the central bank raised the greenback rate by Tk 7 each on May 9.
The exchange rate per dollar in the country was Tk 84.81 in June 2021, Tk 93.45 on June 2022 and Tk 106 in June 2023.
The reserves dropped further in May as import payments of $1.63 billion were made to the Asian Clearing Union for March and April.
The Asian Clearing Union is a payment settlement forum whereby the participants settle payments for intra-regional transactions through participating central banks on a net multilateral basis.
Payment obligations of transactions among Bangladesh, Bhutan, India, Iran, the Maldives, Myanmar, Nepal, Pakistan and Sri Lanka are settled through the ACU payment system.
However, according to Bangladesh Bank鈥檚 conventional valuation, the foreign exchange reserves dropped to $23.71 billion on May 12 from $25.36 billion on April 30.
The reserves had dropped to $19.13 billion on December 6, 2023, but rebounded to $21.74 billion on January 4 after receiving $689 million in loans from the International Monetary Fund and $400 million from the Asian Development Bank.
The reserves, however, started declining again thereafter.
Severe dollar shortage in the market has compelled the central bank to continue selling dollars to banks from its reserves, which has also contributed to the reduction in the country鈥檚 foreign exchange reserves.
The central bank has been selling dollars to commercial banks, with more than $32 billion sold over the past 34 months.
This included $11.6 billion allocated to banks in July-April of the financial year 2023-24, $13.5 billion in FY23 and $7.62 billion in FY22.
The prevalence of illegal hundi market, where unofficial currency trading occurs, exacerbates the crisis by creating significant disparities between formal and informal exchange rates.
Substantial gap between formal and informal rates can potentially divert remittances towards the unofficial channels, leading to under-invoicing of imports and informal capital outflows, bankers said.
Due to the dollar crisis, banks are struggling to settle import payments and open letters of credit, posing substantial challenges for businesses, they said.
