US Office of Foreign Assets Control's (OFAC) recent ban on settling payments through Asian Clearing Union (ACU) may not harm Bangladesh as, among the member countries, Bangladesh's major trade is with India and in favour of the latter, Zahid Hussain former lead economist of World Bank's Bangladesh resident office said.
In a comment on the potential impact of a US banking ban on ACU settlements, he said "While a ban on US banks settling ACU payments could pose a little challenge, it's important to note that Bangladesh's foreign exchange reserves are diversified across various countries. This diversification, along with the potential for alternative arrangements, may cushion the immediate impact. I anticipate a relatively minor disruption to Bangladesh's trade with the ACU network."
The former lead economist of the global lending agency said the US has not imposed ban on a particular country. It is on ACU. "So we should not be worried about it", he said.
Zahid Hussain said the resilience of Bangladesh's economy remains noteworthy, even in the face of potential disruptions in global financial dynamics.
Bangladesh's primary trading partner within the ACU network is India, and trade between these two countries predominantly favours India. While trade with other ACU member countries is relatively insignificant, the India-Bangladesh trade relationship remains pivotal for both nations. Any disruption to this trade flow could potentially impact Bangladesh's economy, a former banker said.
He said while the prospect of a US banking ban on ACU settlements warrants close monitoring, Bangladesh's diversified foreign exchange reserves and the potential for alternative payment solutions could mitigate the immediate impact.
With this ban Indian lenders have approached the Reserve Bank of India (RBI) after the US OFAC asked banks to refrain from processing payments linked to the ACU mechanism. The ACU allows transactions to be squared off by participating central banks on a multilateral basis.
Indian lenders have approached the Reserve Bank of India (RBI) after the US Office of Foreign Assets Control (OFAC) asked banks there to refrain from processing payments linked to the Asian Clearing Union (ACU) mechanism.
The ACU allows transactions to be squared off by participating central banks on a multilateral basis, leaving only smaller net amounts that need to be paid. The ACU members are Bangladesh, Bhutan, India, Iran, the Maldives, Myanmar, Nepal, Pakistan and Sri Lanka.
When contacted a senior official in Bangladesh Bank said, "There is no notification to us yet. We are not being updated."
"But we are contacting with related people", he said.
The ACU was established with its headquarters in Tehran, Iran, on December 9, 1974, at the initiative of the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) to promote regional cooperation.