Inflation likely with high currency reserves | The Daily Star
11:00 PM, November 16, 2009 / LAST MODIFIED: 11:00 PM, November 16, 2009

Inflation likely with high currency reserves

Says finance minister

A healthy foreign exchange reserve is a must for a healthy economy, but everyone should be careful about its probable adverse impacts on inflationary pressures, said Finance Minister AMA Muhith.
"Access to foreign exchange reserve sometimes may lead to inflationary pressures. We all should be careful about the impacts," said the minister at a programme to celebrate Bangladesh's foreign reserve figures that crossed $ 10 billion.
Looking back, the minister said Bangladesh did not have gold reserves worth $ 52 million in 1972 to become a member of International Monetary Fund (IMF).
Canada later helped Bangladesh to become a member of IMF.
"Today, we have foreign reserves worth $ 10 billion. Why should we not expect reserves worth $100 billion in the next 15 years?" Muhith asked the audience.
On November 11, Bangladesh's foreign exchange reserves crossed the $10 billion mark for the first time in history, riding on buoyant remittance inflows, moderate exports and declining import payments.
The foreign exchange reserve was $9 billion in September and $7.47 billion in June. Figures were slightly over $5 billion in June 2007.
Reserves crossed the $10 billion mark mainly due to a significant rise in inward remittances despite global recession that dealt a blow to many countries with negative growth in their remittances.
The finance minister expects a momentum in foreign direct investment (FDI) soon. However a mindset problem remains, according to him.
"We madly want FDI. But at the same time, we start shouting when foreign investors remit money to their home country," he said. "We should change this mindset. There is nothing to worry about."
High remittance inflow through legal channels, a strong anti-money laundering act and steady export growth mainly helped Bangladesh pocket the handsome foreign exchange figure, said Atiur Rahman, governor of the central bank.
Echoing the finance minister on the probable impacts of healthy remittance on commodity prices, he said the next monetary policy by the central bank will take measures to check the impacts.
According to him, the healthy reserves will help Bangladesh take a strong position in bargains for donor aid.
Ziaul Hassan Siddiqui, deputy governor of Bangladesh Bank, conducted the programme, while representatives from banks and other government and non-government organisations were also present at Dhaka Sheraton Hotel.

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