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Efforts to increase reserves should continue

Afroza Hossain

Efforts to increase reserves should continue

Recently, foreign exchange reserves in the country have increased slightly. According to the information of Bangladesh Bank published in the media on June 21, before the holy Eid-ul-Azha, the total reserves in the country were 2 thousand 452 million US dollars on June 12. Reserves increased by $260 million in a week and reached $2,478 million as of June 19. At the same time, according to International Monetary Fund (IMF) accounting method BPM-6, reserves increased by 318.2 million dollars.

At the beginning of June, the reserves as BPM-6 were 1 thousand 872 million dollars. According to this accounting system, on June 12 and 19, the reserve increased to 1,920,970,000 dollars and 1,952,790,000 dollars, respectively. In addition, the total reserve at the beginning of May was 2 thousand 537 million dollars. In the second week, $1.63 billion was paid to the Asian Clearing Union (ACU) from reserves for import bills. As a result, on May 15, the reserves fell to 2,390 billion dollars. At that time, according to BPM-6, the amount of reserves was 1 thousand 842 million dollars. In the next five weeks, the reserve growth trend reached the optimistic level.

It is well known that foreign exchange reserves are very important in various economic activities including meeting the import expenditure of a country, implementing the budget, financing large projects, paying off foreign debt, dealing with financial disasters, preventing the depreciation of the local currency, strengthening the monetary policy. According to economists, a country is fairly safe if it has enough foreign exchange reserves to cover three months of total import expenditure.

Accumulation of foreign exchange reserves for a long time is also not good for the economy. Excess reserves indicate that the economy is stagnating and that the pace of business is not as expected. The country’s main sources of foreign exchange are export earnings, remittance flows from expatriates, loans and grants from donor organizations or partner countries, etc.

According to the statistics of the World Bank, in 1972, the foreign exchange reserves of the newly independent war-torn Bangladesh, including gold reserves, were only 274 million US dollars. Since 2000, the scenario of increasing foreign exchange reserves in the country has become clear. Reserves rose to $5 billion in 2006-07 against a reserve of $1.5 billion in 2001-02. The financial year 2012-13 was a memorable year in the history of Bangladesh Reserves. That year the reserves increased to 15 billion dollars.

In 2014, Bangladesh reached the milestone of $200 billion in reserves. In the financial year 2014-15, the reserve stood at 25 billion dollars and the next year it increased to 3000 billion dollars. According to this, the reserve of Bangladesh increased by 1000 billion dollars in just two years. Subsequently, in the financial year 2019-20, the reserve reached 36 billion dollars. In August 2021, Bangladesh’s reserves rose to 48 billion dollars amid the Corona epidemic. So far this is the highest record of Bangladesh reserve.

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