Foreign Currency

New Age | Banks’ dollar holding hits 21-month low




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A file photo shows a man counting dollar notes in the capital Dhaka.  | New Age photo

Dollars held by Bangladesh’s commercial banks hit a 21-month low in September, driven by a severe shortage of the foreign currency in the country.

In September 2024, the gross foreign currency balance with the banks dropped to $4,981 million from $6,174 million in the same month past year.

This marked the lowest level since January 2023, when it stood at $4,849 million.

The level also decreased from $5,265 million in August and $6,088 million in July this year.

Bankers attributed the decline to several factors, including the central bank’s payments of about $1.5 billion to foreign companies through the interbank dollar market, which drained the banks’ dollar reserves.

Additionally, the central bank halted dollar sales to commercial banks to prevent further depletion of its foreign exchange reserves.

While remittance inflows increased significantly, export earnings have not reached the expected levels in recent months.

Foreign direct investments also fell during this period amid nationwide unrests and political upheaval in the country.

Sheikh Hasina resigned as prime minister on August 5 and fled to India amid a massive student-led civil uprising.

The shortage of dollars is straining the country’s ability to pay for imports and has weakened the Bangladeshi taka, with the exchange rate reaching Tk 120 a dollar.

The remittance inflow for the July-September period of FY24 rose to $6.54 billion, up from $4.90 billion in the same period of FY23.

Bangladesh’s export earnings during the same period increased to $11.37 billion from $10.82 billion in FY24.

Over the past three years until FY24, the central bank sold more than $34 billion to commercial banks, depleting its own reserves.

These dollar sales have reduced the foreign exchange reserves of the Bangladesh Bank and created a liquidity crisis in the banking sector.

The foreign currency reserves, according to International Monetary Fund guidelines, dropped to $19.8 billion on October 18.



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