Forex reserves cross $25b

Bangladesh's foreign currency reserves crossed $25 billion yesterday, setting a new record.

The reserve of $25.02 billion is enough to meet the country's import bills for more than seven months, Kazi Sayedur Rahman, general manager of the forex reserve and treasury management department of Bangladesh Bank, told The Daily Star.

The reserves first crossed the $23-billion mark on February 26 and $24 billion on April 29 this year.

The central bank attributed this large reserve sum to export earnings, remittance, foreign direct investment and the private sector's foreign-sourced loans.

Declining import bills for food grains and petroleum oils also played an important role in fuelling the reserve, according to a statement by the central bank.

Exports grew only 2.8 percent to $28.14 billion and remittances 7.21 percent to $13.87 billion in July-May of the outgoing fiscal year, compared to the same period in the previous year, according to data from the central bank.

On the other hand, imports (freight on board-basis) increased more than 12 percent to $33.46 billion during the first 10 months of the fiscal year till April.

According to analysts, the private sector's increasing dependence on loans from foreign sources has had a major role in the country's forex reserves figure every month.

Government data shows that the private sector took $4.89 billion in loans from abroad in 2014, up from $4.06 billion and $1.79 billion in 2013 and 2012 respectively.

The growing reserves of foreign currency have helped the central bank maintain a stable exchange rate over the last couple of years and provided a more favourable economic environment.

However, fluctuations in the exchange markets can result in gains and losses in the purchasing power of reserves.

For example, Bangladesh holds a majority of its reserves in US dollar-denominated assets, and if the dollar weakens, it will result in a relative loss of wealth.