The central Bank of Bangladesh. BBN file photo
Dhaka, Bangladesh (BBN) - The central bank of Bangladesh has included the asset, lying with International Monetary Fund (IMF)’s currency-SDR (special drawing rights), in the country’s foreign exchange reserve calculation.
Bangladesh’s forex reserve has got nearly US$200 million, equivalent to SDR 134 million, after including the asset, termed as reserve tranche position (RTP) in the estimation, according to officials.
The country’s forex reserve rose to $32.97 billion on Thursday, after adding the RTP, from $32.74 billion of the previous working day, they added.
Talking to the BBN, Abu Hena Mohammad Razee Hassan, deputy governor of the Bangladesh Bank (BB), the country’s central bank, said the central bank is allowed to use the asset with IMF in calculation of its forex reserve.
“Previously, we did not include the asset in the reserve, as the figure was very insignificant,” the deputy governor explained.
The asset has been fixed on the basis of IMF quota for each of the member countries. Bangladesh’s quota rose to SDR 1,066.6 million in 2016 from SDR 533 million earlier.
“We expect that the latest policy decision will help improve the country’s overall balance of payments (BoP) position,” the deputy governor noted.
The BB’s latest move came against the backdrop of a falling trend in BoP, mainly due to higher import payment pressure on the economy.
Bangladesh’s BoP slid to a deficit of $1.03 billion in the first seven months of the current fiscal year (FY), 2017-18, which was a surplus of $2.19 billion in the same period of FY 17.
On the other hand, the central bank of Bangladesh is continuously providing foreign currency support to the commercial banks for settling their bills against import of the essential items, which is gradually putting more pressure on the reserve.
As part of the strategy, the central bank sold $10 million directly to three banks on Thursday to meet the growing demand for the greenback in the market.
A total of $1.80 billion was sold to the commercial banks since July 01 of this FY as part of BB’s ongoing support, the BB data showed.
The central bank may continue providing such foreign currency support to the banks in line with the market requirement, according to the BB official.
The market operators, however, said the demand for the US dollar is increasing gradually, mainly due to higher import payment pressure, particularly of capital machinery, petroleum products, fertilizers, consumer items, and food grains.
The BoP deficit was $354 million in the July-December period of FY 18. It was $360 million in the first quarter (Q1) of the ongoing fiscal.
The BB officials said all 189 member countries of IMF are eligible to use RTP in their reserve calculation. Under the existing provisions, each IMF member is assigned a quota, part of which is payable in SDR or other specified usable currencies (reserve assets) and partly in the member's own currency.
The difference between a member's quota and IMF's holding of its currency is that specific country's RTP. SDR is an international reserve asset, created by IMF in 1969 to supplement its member countries’ official reserves.
As of September 2017, 204.2 billion SDR (equivalent to about $291 billion) had been created and allocated to the IMF members. SDR can be exchanged for freely-usable currencies.
The value of SDR is based on the exchange rates of five major currencies - the US Dollar, Euro, Chinese Renminbi (RMB), Japanese Yen, and British Pound Sterling.
BBN/SSR/AD