THE country’s foreign currency reserves hit an all time high at US$ 19.04 billion on Wednesday last making it the second largest reserves of any SAARC country next to India. Forecasts said that the reserve may cross $20 billion in June next. Bangladesh Bank made the disclosure and said a rise of remittances and export earnings have mainly contributed to the rise followed by a rise in the inflow of foreign direct investment in the recent past. India held $292 billion in reserves in February while it was only $7.1 billion in Sri Lanka in January and $7.59 billion in Pakistan at the middle of this month.
As we know, the size of the foreign currency reserve of a country is considered as one of the few most important indicators of its economic strength. It keeps the exchange rates stable. Moreover, it guarantees unhindered imports as global business partners can maintain trust in our ability to pay due to our higher export earnings, remittances and inward coming investments.
Foreign creditors can also make loans to the government and private business as we get the reputation a safe borrowing nation. News reports said the country’s business partners seek guarantees from a third bank on L/Cs over the past years fearing that the importers and their local banks may not be able to pay in due time. Consequently, importers have to pay the third bank-which is always a foreign bank a huge amount of commission for not using a single farthing in the business transaction. We may hope that the steady rise of the reserves may be able to send the signal to international community that their fears have no ground any more.
Economists hold the view that there is no doubt that a big reserve at Bangladesh Bank is good news for the nation but it also raises concerns why the government is failing to similarly use the money to accelerate the economy and business. Holding back reserves without spending is not the sign of a good functional economy. The country is earning more but failing to make room for proper investment and socio-economic development-this is what the spill over of funds suggests.
Reports said imports have fallen to allow the spill over of funds. We are against import of luxury goods, but more reserves at the Bangladesh Bank will definitely allow more imports of machinery and capital goods to set up new manufacturing plants and export industries. Exporters may be able to import more intermediate goods for local value addition for which the country has the reserves to foot the import bills. So there may be some bottlenecks which are slowing the proper utilization of the reserves suggesting that the economy is not exploiting its full potentials. People mostly blame the absence of political stability and investors’ confidence in the shaky business environment to make aggressive investments. There is no doubt Bangladesh’s private sector has proved its capacity to push external trade to a new height performing better than other regional countries in many respects. But our leaders must learn now how to become the leaders of a prosperous nation instead of pushing the people to fighting.
