Bangladesh Bank Governor Atiur Rahman defended the huge accumulation of foreign exchange reserve on Friday and said the surplus will be used during “rainy days.”
“Having a good forex reserve is not a matter of concern or disappointment,” he told a conference on NRBs in Dhaka, apparently in response to criticisms over the foreign exchange reserve that crossed US$16bn as Bangladesh Bank reported Tuesday last.
The reserve is considered to be enough to meet import payments for about five and half months, almost twice as long as economists think the period should be.
The economists criticised that the huge reserve was “not a good sign for the economy,” as the money was not being invested to generate employment.
Bangladesh Bank executives said the forex reserve had increased substantially due to slowed down imports, particularly of capital machinery, industrial raw materials and food grains; robust remittances; and exports.
Exports grew 24% to $3bn in July due to higher demand for garment items at competitive prices, according to the Export Promotion Bureau. Central bank records show in the first 11 months of the last fiscal, overall import bill payments posted a negative growth of more than 9% to $29.48bn from $32.42bn a year earlier.
“I’m sure investment will pick up soon and the surplus reserve will be used properly,” the governor told the meeting.
He, however, stressed the need for accumulating more reserve as compared to that of India and said “there is no room for complacency.” The volume increase pushed Bangladesh into becoming the second highest foreign currency reserve holder in South Asia, after India.
Atiur said Bangladesh, being a trade deficit country, enjoyed a positive balance in the current account during the last five years, particularly due to continuation of impressive growth in remittances.
“Aided by robust growth in exports and remittances, and moderate growth in imports, foreign exchange reserve in Bangladesh is now more than US$16bn,” he said. “This demonstrates our strength. In a decade, literally, it has become double.”
The governor said the inflow of remittances maintained a healthy growth despite adverse impact from global economic recession and political turmoil across the Middle East.
“Financial and external sector of Bangladesh remained resilient in the face of recent global financial crisis and economic slowdown mainly for these inflows.”
On NRB’s role, he said the contribution of NRBs has been at the heart of policy framework in Bangladesh’s mission of becoming a middle-income country within the next few years.