Photo : Messenger
As the New Year begins, dollar crisis in the country's economy is expected to subside, and there is an indication of a positive trend in the forex reserves.
Meanwhile, the continuously declining reserves have broken the downward trend and returned to an upward trajectory. Economists believe that this trend will accelerate after the national elections.
Prior to this, most of the time in 2023 was spent amid declining expatriate income, negative trends in export trade, and a dollar crisis. Due to these reasons, the foreign exchange reserves also had a negative impact. However, by the end of the year, the reversal of reserves occurred due to increased expatriate income and foreign debt relief, bringing light to the economy after a period of darkness.
According to the latest updated report from Bangladesh Bank (BB), the total or gross reserves stood at $26.04 billion as of December 20, 2023. At the time of discussion, according to the BPM 6 calculation method of the IMF, the reserves amount to $20.68 billion.
Total reserves were $24.89 billion last November. At that time, according to the IMF's BPM 6 accounting system, the reserves amounted to $19.30 billion. The significant drop in reserves raised concerns among businessmen and economists in the country. However, the recovery of reserves within a month has alleviated that anxiety to some extent.
Md. Ainul Islam, General Secretary of the Bangladesh Economics Association and Professor of the Economics Department at Jagannath University, told The Daily Messenger, “The economy was worried due to the decrease in reserves. Reserves have increased after the second tranche of the IMF loan and the ADB loan entered the country, which is good news for the economy. Now, expatriate income should increase to sustain this trend. Simultaneously, exports should be increased. If expatriate and export income rise, the pressure on our economy will be reduced, and the reserves will also increase.”
Meanwhile, in the second half of last year, due to volatility in the dollar market, remittances through legal channels continued to decline. However, the central bank has taken various initiatives to increase remittance income, resulting in an increase in remittance income in December.
The remittance inflow surged by 17.06 percent to nearly $1.99 billion in December 2023 compared to $1.7 billion in the same month of 2022, according to the central bank data.
This surge is part of a larger upward trend in remittances, with the cumulative inflow reaching $10.79 billion from July to December in the current 2023-24 fiscal year (FY). During the first six months of FY23, it was $10.49 billion.
In this regard, Mezbaul Haque, Executive Director and Spokesperson of the BB, told The Daily Messenger, “IMF and ADB loans have been added to the reserves, providing comfort during the financial crisis. After the national election, expatriate income and export trade are expected to receive a boost. In that case, the country's economy will turn around in the new year.”
After the outbreak of the coronavirus pandemic and the Russia-Ukraine war, volatility in the dollar market began. As a result, the country's dollar exchange rate changed frequently during most of 2023. The central bank sold dollars to other banks to overcome the crisis.
Nevertheless, the dollar rose to a record high of Tk 111 in the interbank market and Tk 125-126 in the open market in 2023. Reserves consistently declined to supply dollars. As a result, reserve capacity was not achieved as per International Monetary Fund (IMF) conditions. However, the reserves turned around towards the end of the year as loan funds from other countries, including the second tranche of the IMF loan, began to flow in.
Messenger/Disha
