Bangladesh’s gross foreign exchange reserve, calculated as per the International Monetary Fund’s guidelines, has dropped to $19.7 billion, following a $1.75-billion payment to the Asian Clearing Union for import bills covering January and February.

According to Bangladesh Bank data, the reserve fell to this level on Sunday, shortly after standing at over $21.39 billion on March 6.

The payment is made in every two months.

However, according to conventional valuation by the Bangladesh Bank, the foreign exchange reserve is now $24.95 billion.

The ACU, a payment settlement forum, facilitates net multilateral settlements for intra-regional transactions among Bangladesh, Bhutan, India, Iran, the Maldives, Myanmar, Nepal, Pakistan, and Sri Lanka.

Payments are made every two months, and this recent outflow has further strained the country’s foreign exchange reserves.

Despite efforts to stabilise the reserve, high overdue and current import payments have hindered growth, even as remittance inflows and export earnings have shown improvement.

The Bangladesh Bank has implemented several measures to curb the sharp depletion of reserves. These include halting direct dollar sales from the reserve, allowing the exchange rate to adjust more freely to market conditions, and cracking down on money laundering and corruption following the political shift on August 5.

A higher exchange rate and reduced money laundering have lowered demand for hundi transactions, leading to increased remittance inflows through formal banking channels.

Moreover, the current economic crisis and nationwide unrest have also contributed to lower dollar demand, as many businesses have cut back on raw material imports or shut down production since the political regime shift.

To manage reserves more effectively, Bangladesh Bank has stopped directly selling dollars to banks and instead relies on the interbank market to meet government payment obligations.

According to BB officials, remittance inflows surged following the political changes on August 5, reaching $18.5 billion in the first eight months (July-February)  of the 2024-25 fiscal year, up from $14.95 billion in the same period of the previous year.

The Bangladesh Bank adheres to the IMF’s Balance of Payments and International Investment Position Manual, 6th edition (BPM6), for calculating both the gross international reserve and the net international reserve.

The Bangladeshi taka weakened against the US dollar, reaching Tk 122 for a dollar, driven by a dollar shortage and pressures on banks to settle import payments.

The exchange rate per dollar was Tk 84.81 in June 2021, Tk 93.45 in June 2022 and Tk 106 in June 2023.