Steps should’ve been taken much earlier to ensure reserves remained steady Sat May 14, 2022 12:00 AM Last update on: Sat May 1
Steps should’ve been taken much earlier to ensure reserves remained steady
Sat May 14, 2022 12:00 AM Last update on: Sat May 14, 2022 12:04 AM
Photo: Alexander Schimmeck/Unsplash
“>
Photo: Alexander Schimmeck/Unsplash
It’s good to know that the government has finally taken some measures to safeguard our foreign currency reserves, which have come down to less than USD 42 billion. The government has put its employees’ foreign tours on hold, and has also deferred the development projects that require a lot of imports. The central bank has also toughened its rules for importing luxury and non-essential items such as sports utility vehicles, washing machines, air conditioners and refrigerators. We hope the decisions, though late, will be enough to ensure that the country’s foreign currency reserves don’t decline further.
Throughout last year, our forex reserves stayed at a healthy level—enough to cover six to eight months’ imports, as exports surged and remittance started to come in once the pandemic was somewhat brought under control. But the situation took a turn for the worse with Russia’s invasion of Ukraine in February. A drop in remittance growth and increasing import bills have badly affected our forex reserves. While the World Bank and the International Monetary Fund (IMF) prescribe a reserve buffer of six months’ import bills, our current forex reserves can cover only five months’ bills.
For all latest news, follow The Daily Star’s Google News channel. Our dollar reserves have been dwindling since January, and economists have been warning the government about this—but to no avail. Why did it take so long for us to react when our neighbour Nepal imposed a ban on luxury and non-essential imports last month, when its import cover was for seven months?
In January this year, when the government made plans to use our forex reserves to install a USD 370.96 million power transmission line from Payra seaport, the IMF warned that “ad-hoc use of forex reserves could undermine fiscal discipline by exposing the public sector to large contingent liabilities and fiscal risks.” The government, however, refused to acknowledge any risks.
Now that the government and the central bank have come up with some good measures, we hope that they will yield the desired results and help keep our forex reserves steady. Restricting the foreign trips of government officials is particularly a good idea, as it could save a lot of foreign currency. Reportedly, Tk 2,500 crore was saved in the past two years as the government had put all foreign trips by its ministries and divisions on hold during the pandemic. It should now focus on implementing the decisions it has taken, as implementation has always been a big challenge for it.
www.thedailystar.net