Recent fall in inward remittances, earnings from exports, and a looming global recession are all signalling that the external account crisis will be prolonged further, they say. They projected that around $20 to $25 billion worth of foreign currency has been consumed in different forms by informal transactions, which are not recorded at any official level. Because of this, the depth of the foreign exchange crisis is remaining less understood and unaddressed. they say.  Dr Debapriya Bhattacharya, a macro-economist and a Distinguished Fellow at the Centre for Policy Dialogue (CPD), told UNB that to understand the magnitude of the problem it is important to see how it works or does not work in a complex market of foreign currency. “We should take note of it that a big volume of the foreign currency, I mean, US dollar is used for financing consumption of goods and services overseas as well as third-party cross-border payment for smuggled items such as gold and cattle,” he said. “Moreover, illicit financial flow is also taking place from over-invoicing in the private sector transactions and public sector projects,” he said. In line with these unrecorded and informal, and often illicit foreign exchange transactions, the monetary policy in general and foreign exchange regulation, in particular, have limited institutional effectiveness with regard to external balance management, he pointed out. Debapriya said Bangladesh is now a $500 billion economy, and managing such an emerging macro-economy with a fast-changing global scenario demands institutional reforms to swiftly oversee the forex market. As the government negotiates balance of payment support from the International Monetary Fund (MF) such reforms addressing the informal transactions of foreign currency will become a major concern to deal with, he said. Read: Market-based foreign exchange rate may be introduced soon: Finance Minister This will also need complementary trade and investment policy reforms, he added. Though the economy is expanding, the institutional reforms and capacity is not being enhanced accordingly, he said. He said that the World Bank has rightly predicted that unless massive reforms are done Bangladesh’s economic growth would slip in the face of impact of global trade competition. Dr Mohammad Abdur Razzaque, an economist and specialist in applied international trade, told UNB that falling remittances by 25 percent and export falling by over 6 percent is “a warning for Bangladesh’s forex market.” He said Bangladesh will get an advantage slightly from the falling prices of fuel, edible oil and other commodities in the global market due to a recession. The use of forex for import payments will be decreased at the same time, affecting Bangladesh’s export income, and the trade deficit will also widen then, he said. In the first two months (July-August) of the current fiscal year 2022-23, the trade deficit stood at $4.55billion. As the export income is less than the import spending, this large trade deficit appeared at the beginning of the fiscal year. At the same time, the deficit in the current account balance of foreign transactions also exceeded by $1.5 billion. Also read: Foreign exchange rate stable after Bangladesh Bank tightens spending According to Bangladesh Bank, in the first two months (July-August) of the current fiscal year, goods worth $12.69 billion have been imported against exports worth $8.13 billion. This has created a trade deficit of $4.55 billion. The deficit volume will widen more as the export in last month (September) fell by 6 percent. Bangladesh Bank is selling US dollars from the reserves in continuation of the last fiscal year to bring 'stability' to the forex market. The central bank sold $2.57 billion from reserves in two months (July-August) and of the current FY 2022-23. The central bank sold $7.67 billion from reserves in the FY 2021-22 to stabilize the forex market. Bangladesh had never sold so many dollars from the reserve in a single fiscal year earlier. However, in the previous financial year (2020-21), Bangladesh Bank bought a record $8 billion to keep the forex market stable during the falling trend of imports during the Covid-19 pandemic.