Bangladesh’s performance in managing foreign currency reserves is recorded to be better than that of India and Pakistan. The status of these three countries’ central banks revealed this point recently. From these banks’ last month’s data, it has come to attention that, with the exception of Bangladesh, the reserves of Pakistan and India continued to decline.
Although Bangladesh was suffering from the gradual decrease of foreign reserves, the data of the last few months shows an upward sloping tendency in the foreign reserve amount of Bangladesh.
On 31st January, the reserve of Bangladesh’s foreign currency was amounted to $32 billion. After 15 days, when calculated, it was found that the reserve increased to $32.60 billion in the first half of February of this year. The reserve is still maintaining its dominance.
What do experts think about this rise?
According to central bank officials, remittances and refunds have returned to their previous increasing state. And the growth is being caused by the elimination of several control measures. Mezbaul Haque, the spokesman of Bangladesh Bank, said in a report that “we have Ramadan and Eid-ul-Fitr ahead. So, the remittance flow will increase further in the upcoming months, which will boost Bangladesh’s capability to take a more relaxed position in economic sectors. However, it will not be right to think an overnight transformation of situation prevailing here.” Reserve recovery is, therefore, expected over time as the situation is changing slowly.
IMF’s forecast about Bangladesh’s financial position
The International Monetary Fund (IMF) predicted that the reserve of Bangladesh would go down to $30 billion by the end of 2022. But things will not go forever like this. The IMF forecasts that after a certain period, the the country’s situation will improve and the reserve will surpass $50 billion at the end of the 2026-27 fiscal year. IMF used several financial indicators to make this forecast about Bangladesh’s economy.
Giving a base to Bangladesh’s overall economy
In order to stabilise the country’s economy, Bangladesh Bank (BB) is continuously selling dollars. It is also implementing strict measures to control hundi, the prime enemy of remittances. So, the situation is expected to improve over the course of time.
According to BB officials, the average was at its peak in November, December, and January, when the rate was on average $520 million per month. Furthermore, remittances increased significantly in January due to expatriate income of $196 million, up from $170 million in December. In the first 10 days of the current month, a total of $64 million in remittances have added to country’s foreign reserve, and it is expected to rise in February too.
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Several measures, such as a 100% LC margin and increased supervision, have been implemented to reduce imports, and the rate has decreased by 2.15 per cent to $3.813 billion as of December. So, it can be said that the overall pressure on foreign currencies is decreasing gradually.
The data shows that Bangladesh’s foreign currency reserve amounted to $32.52 billion, after paying its import bill to Asian Clearing Union (ACU) on January 9. Since then, the gradual growth is showing its worth in bringing Bangladesh back to its dominant position in the economic sectors.
Scenery of India’s Economy
Unlike Bangladesh, India is still suffering greatly from the currency crisis. This country has recorded the biggest fall in reserves in the last 11 months. The reason behind the fall of reserve is the selling of dollars by the Indian central bank, the Reserve Bank of India, said The Times of India in a report. The central bank did this in order to give a stable position to Indian economy and to hold the value of the rupee. According to the most recent data from the Reserve Bank of India, the reserve amount has decreased by $830 crore and now stands at $56,695 crore. As the statistics revealed, this is the biggest drop in India’s reserve currency since last April.
When the central bank started to use dollars in order to support the local currency, the rupee, at the time of the global financial crisis, the reserve started to fall gradually. However, the situation deteriorated following Adani Group’s accusation of a share scam by US-based Hindenburg Research.
According to a Bloomberg report, India’s foreign exchange reserves fell $8.3 billion to stand at $566.95 billion as of February 10 this year, the lowest level since April 2022.
Pakistan on the verge of bankruptcy!
Things are not only bad in India, but also in Pakistan, another neighbouring country, which is suffering too heavily due to the reserve crisis in their country. According to the data found from the State Bank of Pakistan, the country’s central bank, the Reserve of Pakistan has decreased by $170 million this February. The current amount of reserve currency is only worth $290 million.
A report says, Pakistan will have to repay about $22 billion foreign interest and debt in the next 12 months, which is a threatening factor for the current drowning situation of the country. If Pakistan fails to pay the loans, the country will be named as “loan defaulted country.”
The State Bank of Pakistan says this country will have to pay a total of $21.95 billion in debt in a year, of which $19.34 billion is the primary debt and $2.60 billion is the interest. From February 2023 to June 2026, this country will have to pay a huge debt amounting to $80 billion. This is really an alarming situation for the country.