The intensive effort by the Bangladesh Petroleum Corporation (BPC) to hunt dollars to meet its import demand coupled with the suspension of LNG purchase from the international spot market has eased pressure on the country's foreign exchange reserves.
The forex reserves have remained stable between $39 billion and $40 billion this month as the Bangladesh Bank has cut back on dollar sales for importing petroleum products.
The central bank has been selling $50 million to $70 million per day to banks this month, which was over $100 million in June.
Prime Minister Sheikh Hasina on Wednesday said Bangladesh would be able to import food for six to nine months with its existing foreign currency reserves.
While addressing the 28th founding anniversary programme of Bangladesh Awami Swechasebak League on Wednesday, the premier, however, mentioned that the government will have to take steps to grow more crops in order to save foreign currency for any emergency.
For the first time in two years, Bangladesh's foreign exchange reserves dropped below $40 billion on 12 July this year, reaching $39.77 billion, after the central bank cleared $1.99 billion in import payments to the Asian Clearing Union (ACU).
But the central bank did not let the reserves come down below $39 billion.
The foreign exchange reserves stood at $39.49 billion on Wednesday, according to the Bangladesh Bank.
On the other hand, a shortage of US dollars created panic among stakeholders, causing an unusual price hike of cash dollars in the kerb market.
The cash dollar rate surged to a record high Tk112 on Tuesday but fell to Tk108 the following day.
Meanwhile, the LC settlement rate has climbed to Tk104-105 this week, raising import costs which will ultimately fuel inflation.
While speaking to The Business Standard, a senior executive of the Bangladesh Bank said keeping forex reserves stable was their first priority, not inflation.
Mentioning that surging inflation is now a global phenomenon, he observed that the main focus should be on ensuring the availability of dollars in order to keep economic activities rolling.
In this perspective, the central bank is taking up all-out measures to cut import expenditures to ease pressure on reserves, he added.
The BPC has slowed down imports as it is trying to get foreign currency loans to meet its demand for additional dollars in the wake of hikes in petroleum prices in the global market.
The International Islamic Trade Finance Corporation (ITFC), a member of the Islamic Development Bank, has already approved a $1.4 billion loan to the BPC for this fiscal year, which is almost double the amount, $850 million, received last year.
Now the Petroleum Corporation is negotiating for another $1 billion because of an acute dollar crisis in banks, said its General Manager (finance) Moni Lal Das.
He went on to say that a lender has already agreed to provide $500 million, which will be used to support the additional dollar requirement.
Moreover, the government has recently suspended LNG purchasing from the spot market for the time being, which also has helped save the country's forex reserves.
On the other hand, overall imports slowed down in June after the Bangladesh Bank tightened the import of luxury goods.
Imports declined 6% month-on-month this June, according to the central bank's data.
The volume of LC (letter of credit) opening fell to almost half the previous level in most banks in the first week of July, bankers said.
Meanwhile, Finance Minister AHM Mustafa Kamal has said that stern action will be taken against people trying to artificially increase the dollar price.
His warning came in a briefing to reporters following a meeting of the Cabinet Committee on Government Purchase in Dhaka on Wednesday.
"Many are making import arrangements by hiking the [dollar] price. Denied by one bank they are moving to another offering a higher price. The government is working to put an end to this," he said.
The dollar crisis will end soon, he said, adding that remittance inflow and exports also will increase this year.
Remittance inflow offers a ray of hope as the country has received $1.64 billion in remittance in the first 21 days of this month, thanks to Eid-ul-Azha when Bangladeshi migrants sent more money home for their families to celebrate the festival, according to data obtained from the Bangladesh Bank.
This June, the last month of fiscal 2021-22, Bangladeshi expatriates sent home $1.83 billion through the banking channel.
A faster devaluation of taka also has contributed to the surge in remittance receipts, observed industry insiders.
The Bangladesh Bank has devalued the local currency thrice this month setting the inter-bank exchange rate at Tk94.70.
In June, exports clocked the $4.90 billion mark – the highest in a single month in the last fiscal year, and the June growth was over 37% when compared to the same month a year ago.
For the first time, Bangladesh's export earnings crossed $52 billion in the just-concluded fiscal 2021-22.