The country's foreign exchange reserves reached a new high yesterday, crossing the $22 billion-mark for the first time in the nation's history.
Reserves stood at $22.05 billion, according to data from the Bangladesh Bank. On June 16 this year, the reserves crossed the $21-billion mark.
The central bank attributed the extraordinary rise to the significant increase in remittance, steady export growth and an increase in corporate borrowing from foreign sources.
Kazi Sayedur Rahman, general manager of BB's foreign exchange and treasury management department, tipped the reserves to grow further this month as there is no payment pending with the Asian Clearing Unit.
BB officials also said the central bank's resolve to maintain a stable taka-dollar exchange rate and stimulus to exporters including the expansion of the export development fund drove the reserves to a record high.
Zahid Hussain, lead economist at the World Bank's Dhaka office, said: “The good news is that the surplus in the balance of payments has been sustained despite a remittance decline in fiscal 2013-14.” The large pick-up in remittance in July contributed to sustaining the surplus in current account so far this fiscal year, he said. Last month, a record $1.48 billion of remittance came into the country.
“The stock of reserves now has enough caution to absorb increases in imports induced by pick-up in domestic investments. But, the latter does not seem to be happening yet because of the continued weakness in investment climate.”
Imports have remained sluggish in recent times. In the first 11 months of fiscal 2013-14, it grew 9.77 percent; exports, on the other hand, went up 11.65 percent.
The WB economist also said the rise in reserves now challenges monetary management, as it has added to excess liquidity in the banking system.
So far this fiscal year, the central bank has already purchased around $773 million of foreign currency. In fiscal 2013-14, it purchased around $5.15 billion. Subsequently, it added to the banks' already bloated liquidity.