WITH the country’s foreign exchange reserves crossing the $21-billion mark for the first time on Monday as Bangladesh Bank purchased US dollars’ worth around $5 billion this year and $87 million from the local banks on the day, idle dollars are piling up in the state reserve. The reason provided for this excessive reserve is to keep the taka stable against greenback. After the BB bought a huge amount of foreign exchange in the last few financial years, the taka became stable at around Tk 77.75 a dollar between May 2013 and February 2014.
Due to the central bank dollar buying spree, the greenback started to depreciate in May and it was quoted (buy-sales) at Tk 77.63-Tk 77.63 on May 22. Against the backdrop, the central bank pushed up its greenback purchases, resulting in the taka becoming stable at Tk 77.63-Tk 77.63 a dollar this month which also boosted the foreign exchange reserves, BB officials said.
However, sharing the concerns with most experienced economists of the country we too know that a ‘big-but-idle’ reserve is not productive for the economy. Economists think that, there is no transparency in the method by which Bangladesh Bank is increasing the foreign currency reserves. Moreover, there are self-contradictory actions in BB policy. The central bank is increasing the reserves by buying bulk amount of dollars from the domestic banks to keep the exchange rate stable; at the same time it is not allowing local businesses to borrow foreign currency from overseas with ease. Borrowing for them comes only at hard terms. Economists think that BB should be more generous to local businessmen by allowing them to import industrial raw materials and capital machinery with the reserves.
Even BB officials know that the record foreign currency reserves indicate slower economic activities and lower GDP growth in the country. Entrepreneurs did not go for much import of goods and capital machinery due to a slack in economic activities and fall in domestic demand due to political uncertainty in the country which in effect resulted in bigger reserves of foreign currency. So there is little to cheer about this record reserve. The reserves may increase furthermore in coming quarters, if imports do not rise in accordance with the country’s economic size. So, it is not understandable to us that why BB is not allowing easy access to foreign reserves to incentivize import of raw materials to boost up economic growth. BB should clearly say how it is hiking its reserves. If the record busting amounts of foreign currency is of no use to our businesses then what is the meaning of this superficial pride? We urge the governor of Bangladesh Bank to immediately ease the conditions of borrowing from the foreign reserve for importing raw materials.
