Dhaka, Bangladesh (BBN)– The central bank has so far pumped in $1.02 billion directly to the country’s commercial banks to enable the latter to meet their higher demand for the greenback mainly to settle import letters of credit (LCs) in the current fiscal.

The country’s foreign exchange reserve came down to $10.43 billion on May 31 this year from $11.316 billion on April 28 last, according to the central bank statistics.

The Bangladesh Taka (BDT) has, meanwhile, depreciated by over 0.84 per cent against US dollar in the last one month in the inter-bank foreign exchange market.

The weighted average of the BDT against US dollar was BDT 73.56 in the inter-bank foreign exchange market on May 31 last. It was BDT 72.95 on April 28 this year.

The Bangladesh Bank (BB) official said the central bank has been providing foreign currency support continuously through sales of US dollar directly to the commercial banks for settlement of import bills that have been exerting some pressure on the country’s foreign exchange (forex) reserve.

“We’ve provided nearly $900 million as overdraft (OD) facilities to the commercial banks, particularly to the state-owned commercial banks (SCBs) since December 2010. Out of this amount, some $438 million still remains outstanding,” another BB official was quoted by the Financial Express (FE), local newspaper, as saying.

As part of the operation, the central bank sold $181 million in the last week to four SCBs directly to meet their growing demand for the greenback.

Last week, the BB sold the US currency to SCBs to settle outstanding letters of credit (LCs) against imports of petroleum products, food grains, fertilizer and power plant equipment, the central bank officials said.

Besides, the BB provided overdraft (OD) facilities for $10 million to two SCBs on the same ground, the central bank official added.

Higher import payments have continued to exert pressure on foreign exchange reserve, forcing a steady depreciation of BDT against US dollar.

The country’s foreign exchange reserve has been facing the pressure mainly due to slower pace of remittance inflow and higher import payments, particularly for fuel oils, food grains and power plant equipment.

“The pressure on foreign exchange reserve has increased gradually and it will continue until the end of this month,” a senior official of the Bangladesh Bank (BB) told the FE Saturday.

Depreciation of BDT against US dollar has, however, partly helped the country’s exporters to fetch more orders in the global market. But this is also likely to discourage import of the consumer items in the near future.

“The country’s export will boost up further in the near future following the gradual depreciation of BDT against US dollar,” a senior treasury official of a foreign commercial bank told the FE.

He also said the import of consumer items, particularly luxury cars, will be discouraged in the near future largely because of depreciation of BDT against US dollar. However, the government’s import is likely to remain unchanged, he added.

The country’s overall imports grew by nearly 42 per cent in the first nine months of this fiscal, due to a jump by 122 per cent in import of food grains.

The letters of credit (LCs) against imports worth $23.507 billion were settled during the July-March period of fiscal 2010-11 (FY11), compared to $16.588 billion during the corresponding period of the last fiscal, the BB data showed.

Besides, the slowed-down pace of remittance inflow in April 2011, as compared to the situation in the previous month, also pushed the pressure on foreign exchange reserve, the central bank official added.

The Bangladeshi nationals working abroad sent US$976.14 million in April 2011, recording a fall of $126.84 million from the level of the previous month. In March, the remittance earnings stood at $1.103 billion, the BB officials added.

BBN/SSR/AD-05June11-1:09 pm (BST)