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Less than a week after implementing a visa ban, the United States has delivered another significant blow to the economy of Bangladesh. This time, the U.S. Office of Foreign Assets Control (OFAC) has issued directives to U.S. banks, instructing them not to facilitate transactions with the Asian Clearing Union (ACU).
This latest development threatens to further complicate trade relations among ACU member countries. The Asian Clearing Union serves as a crucial inter-regional settlement agency, facilitating transactions between member countries.
One of the key advantages of this system is that central banks are not required to pay the full transaction amount upfront. Instead, they settle the balance, paying only what they owe to each other.
Historically, Bangladesh Bank has been utilizing the ACU to purchase products and settling payments every two months. Among the nine countries in the ACU, Bangladesh, apart from India, holds the distinction of being the largest importer of goods through this system. Unfortunately, the recent U.S. ban may compel Bangladesh to engage in higher-cost cash purchases, exacerbating the country's ongoing dollar crisis.
According to ACU's data, Bangladesh consistently ranks among the top countries in terms of the purchase price of products transacted through this international organization. In 2021 alone, Bangladesh imported goods worth $10,609.21 million, accounting for a substantial 37 percent of ACU's total transactions. During the same period, Sri Lanka and Pakistan imported goods worth $3,566.69 million and $948.91 million, respectively. Notably, India remains the dominant player, constituting 46 percent of ACU's total transactions.
In response to this situation, Indian media outlets, including the Economic Times, have reported on the actions of the U.S. Office of Foreign Assets Control. Consequently, Indian banks have approached their central bank, the Reserve Bank of India (RBI), seeking guidance and resolution.
An official from Bangladesh Bank, who preferred to remain anonymous, revealed that Bangladesh Bank initiated communication with the Reserve Bank of India by sending an email on Tuesday, September 26th, inquiring about the details of the situation and whether they are aware of it.
The implications of this situation are far-reaching, as it could lead to complications in the settlement of import and export transactions, given that Bangladesh imports a substantial volume of goods from India. If ACU transactions become untenable, the cost of importing goods is likely to rise.
ACU member countries have limited alternative channels for conducting transactions with India. Therefore, Indian commercial banks are actively seeking RBI's intervention to address this issue, primarily because India exports more to ACU member countries than it imports, leading to significant funds being tied up.
Mezbaul Haque, Executive Director and spokesperson of Bangladesh Bank, responded to the situation by stating that ACU has a secretariat board, and if there were such instructions, they would have received a letter about it. When asked about the future of transactions with member countries if the ACU system is disrupted, Haque noted that payments would have to be made through conventional means, resulting in higher costs and complications. Unlike ACU, which allows for a two-month settlement period, standard transactions require immediate payment, depriving Bangladesh of these beneficial terms.
The Asian Clearing Union was established on December 9, 1974, under the auspices of the United Nations subsidiary ESCAP, with the aim of promoting regional cooperation. The ACU's headquarters are located in Tehran, the capital of Iran. Member countries of the ACU include Bangladesh, Bhutan, Iran, India, Maldives, Myanmar, Nepal, Pakistan, and Sri Lanka.
Messenger/Disha
