Wednesday, May 29, 2024


Dhaka Tribune

Foreign reserves cannot stay on the knife’s edge

This is not a sustainable solution for Bangladesh when it comes to propping up its foreign exchange reserve

Update : 17 Apr 2024, 11:17 AM

The continued fluctuations being experienced by Bangladesh’s foreign exchange reserves have certainly proven to be a point of anxiety for our economy in the past few years, fueled primarily by factors such as the deferring of payment during the Covid-19 pandemic, increasing cost of imports, lower export revenue, and the devaluation of the taka.

On the surface, our foreign exchange reserves surpassing the $20 billion mark is certainly a positive development, however they were notably higher, at $31.20bn, during the same period last year. The recent upward trend, as reported in the news, has been attributed to higher export earnings and inflow of remittances during Eid-ul-Fitr, but given the seasonal nature of remittances, this is not a sustainable solution for Bangladesh when it comes to propping up its foreign exchange reserve.

It has been known for quite some time that the best way to combat a falling or fluctuating reserve is to reinforce our trade, specifically our exports. For too long has Bangladesh relied on remittances and the RMG sector to prop up the brunt of the economy -- we need a way out of this. Yes, these two sectors have done a lot of heavy lifting, economically speaking, but relying on only a handful of industries has never been a wise decision, certainly not for one which harbours ambitions as high as Bangladesh at the moment.

A close examination of our export basket, then, is clearly in the offing, one that pin-points promising new industries that we can harness in order to ensure a steady flow of foreign currency.

To that end, another sore spot for Bangladesh has been just how difficult it has been to attract foreign investment. Our country has historically fared very poorly when it comes to ease of doing business with rampant corruption and needless bureaucracy getting in the way of companies conducting business -- this needs to be addressed.

We cannot afford our foreign exchange reserves remaining on the knife’s edge, our future development all but rests on its health.

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