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The amount of foreign currencies held by the country’s commercial banks increased slightly by 4.5 per cent in November compared with that in the previous month amid various initiatives taken by the government to improve the situation.
The gross foreign currency balance with the banks increased to $4,708 million in November from $4,505 billion in October, according to Bangladesh Bank data.
Bankers, however, said that the rise was not enough to improve the ongoing dollar crisis on the financial market as the commercial banks continued struggling in settling import payment obligations due to the shortage of the greenback.
The growth in dollar reserve might be the outcome of a number of initiatives taken by the central bank as well as the government since April 2022 in order to restrain foreign currency expenditures, BB officials said.
The BB put restrictions on importing luxury items and unnecessary products.
Fresh opening of import LCs in July-September of FY23 decreased by 8.57 per cent compared with that in July-September of FY22, the BB data said.
However, only a handful of the banks held a major portion of the holdings as many banks had deficit in dollar reserve.
The crisis prompted the banks with low foreign exchange reserve to refuse to open LCs, as they did not have enough dollars to meet the high demand for the greenback on the market.
The BB officials said that the banks which held a large portion of dollar reserve were reluctant to give dollar supports to other banks, making the interbank foreign exchange market ineffective.
They said that state-run banks preferred to open LCs for the government, in particular, to import essential products, while some banks with dollar surplus were opening LCs for large-scale businesses to bring necessary products.
They said that even some banks had to refuse to open LCs for importing essential commodities, including food, due to the dollar shortage.
The November balance was 9.56 per cent lower than the June balance of $5.2 billion. It was $5.57 billion in November 2021.
The commercial banks held $6.00 billion at the end of July 2021, but the balance has started falling since then, the data showed.
Most of the banks delayed paying their import payment obligations, the bankers said.
The banks reduced the import of unnecessary products and rationed the opening of LCs, they said.
However, the large companies could not import as much as they needed and small and medium-sized businesses felt the full brunt of the crisis, they said.
The foreign currency reserve in Bangladesh dropped to $33.92 billion on December 7 as the Bangladesh Bank increased dollar sales to tackle the greenback crisis on the market.
According to a suggestion made by the International Monetary Fund, if the $8 billion used as an export development fund is excluded from the foreign exchange reserve, the reserve stands at $26.3 billion, the lowest in seven years.
The dollar crisis worsened amid high import payments, low remittances and export earnings.
Remittances and export earnings are prime tools for the bankers to meet the demand for dollars, but both are yet to improve at an expected level, the BB officials said.
The exchange rate rose sharply to Tk 107 from Tk 84.8 against the US dollar within a year.
The BB approved the floating rate of dollars on September 14.
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