The economic landscape of Bangladesh is witnessing a remarkable transformation with significant developments in remittances, exports, and trade dynamics.
In the past few months, remittances have shown consistent growth, contributing to a positive shift in the country’s economic scenario. Concurrently, export earnings have been on an upward trajectory, further influencing the overall economic landscape.
Importantly, the reduction in import costs has played a pivotal role in decreasing the overall trade deficit. The implementation of restrictions by Bangladesh Bank has resulted in a decline in the import of capital machinery in the country.
Recent data from the central bank reveals an account surplus of $1.92 billion in December last year, reflecting a positive trend in economic indicators.
Expatriate earnings are emerging as a key factor shaping Bangladesh’s current economic scenario, with remittances totaling around $2 billion consistently over the past five months. However, the surge in foreign exchange reserves led to a decrease below $20 billion after settling the import bill of $1.29 billion with the Asian Clearing Union (ACU).
As of March 7, foreign exchange reserves stand at $19.99 billion, down from $21.15 billion on March 6. The introduction of the money-dollar swap facility has seen an increase of $1 billion in Bangladesh Bank’s reserves within 15 days. It’s worth noting that while the total reserve is increasing, the net or real reserve remains unchanged, as these dollars are temporary additions subject to return.
Banks are benefiting from the currency swap facility, utilizing funds at a maximum of 2.5% to acquire dollars. The funds can be invested in government treasury bills at up to 11.5% interest or lent out at an interest rate of 13.11%, providing commercial banks with an opportunity to earn more from low-cost funds.
According to banking sources, currency swapping with commercial banks, initiated on February 20, has played a crucial role in augmenting reserves. Remittance inflows, exceeding $2 billion in February, have also contributed to the steady increase in gross reserves.
Dr. Ahsan H Mansur, Executive Director of the Policy Research Institute of Bangladesh, views the rise in interest rates on loans as a positive sign, leading to a reduction in the dollar crisis.
Meanwhile, the export sector is experiencing robust growth, with earnings reaching about $5.19 billion in February, marking a 12% increase from the same month last year. The country’s highest-ever export earnings of $5.76 billion were recorded in January.
Data for the July-December period of the fiscal year 2023-24 indicates a 19.80% decrease in overall imports to $3.05 billion compared to the previous financial year. In contrast, exports increased by 0.64% to $2.59 billion, resulting in a significant reduction in the trade deficit to $4.59 billion, down from $12.31 billion in the same period last year.
