The volume of foreign currencies held by the country’s commercial banks dropped in March amid increased demand, driven by a severe shortage of dollars.
The gross foreign currency balance with the banks dropped to $5,439 million in March from $5,534 million in February and $5,559 million in December 2023.
The gross balance in March 2023 was $5,343 million.
The balance included nostro accounts and investments in offshore banking units.
The country is facing a growing challenge in securing US dollars, with both commercial banks and the central bank experiencing declining foreign currency reserves.
This shortage is putting a strain on the country’s ability to pay for imports and is causing the Bangladeshi taka to weaken against the dollar.
The crisis intensified as remittance and export earnings slowed while inflow of foreign direct investment dropped.
Export earnings in July-February of the financial year 2023-24 increased marginally by 3.76 per cent to $36.26 billion compared with those of $34.95 billion in the same period of FY23
In July to March period of FY24, remittance inflow reached $17.04 billion compared with that of $16 billion in the same period of FY23.
Since April 2022, the government and the Bangladesh Bank have implemented various measures to curb import surges, including restrictions on luxury items and non-essential products.
These measures have resulted in a 15.36 per cent decline in imports in July-February of FY24 compared with that in the same period of the previous financial year.
The Bangladesh Bank has intensified monitoring of imports to prevent sudden outflows of foreign currencies.
Additionally, the central bank has been selling dollars to commercial banks, with more than $32.8 billion sold over the past 34 months.
This included $11.67 billion allocated to banks in July-April of FY24, $13.5 billion in FY23 and $7.62 billion in FY22.
The dollar sales had unintended consequence of reducing the foreign exchange reserves of the BB, while also mopping up the local currency, which created another problem — a liquidity crisis in the banking sector.
Bankers said that the dollar holding by banks was not substantial enough to alleviate the ongoing dollar crisis on the financial market.
As there is a shortage of dollars, many import payments were delayed or renegotiated, giving banks more time to acquire the necessary foreign currencies.
The burden of the dollar shortage is not being shared equally by all banks.
Only a few banks hold a significant portion of the country’s dollar reserves, while many others are struggling to meet their customers’ demands for foreign currency.
As a result, the foreign currency reserves, according to International Monetary Fund guidelines, dropped to $19.9 billion on April 24, leading to a sharp rise in the exchange rate to Tk 110 from Tk 91 against the US dollar within a year.