by Md Mazadul Hoque;
Bangladesh was ranked 2nd highest among South Asian countries in terms of foreign currencies reserve next to India. As of 30 June, 2020, Bangladesh’s foreign currencies reserve reached around 36.16 billion US dollars. The figure came to the nation as ray of hope amidst pandemic. This recent development of reserve came to the notice of honorable Prime Minister Sheikh Hasina, who has reportedly asked the authorities concerned to judge the feasibility of borrowing from the reserve to address the country’s expenses. The comment came in order to address the ongoing development expenses.
The decision of taking loans from foreign currencies reserve made the economists frustrated. As an economic analyst, my opinion is that usage of foreign currencies reserve except import payments would not be wise. The Covid-19 pandemic also tells us to earn foreign currencies more by hook or by crook. Bangladesh’s economy is likely to experience the shock in absence of required amount of foreign reserve. So, any decision has to be taken very cautiously. The economies affected by novel coronavirus ought to move through planned way.
Let us keep our eyes on the balance of payment situation of Bangladesh. The Balance of Payment ( BoP) situation advises not to use foreign currencies reserve for other purposes except import payment. There is a deficit of around 15 to 20 billion US dollars in Bangladesh’s balance of trade in terms of export earnings and import costs. Balance of Payment statement, which is showing huge deficit, made the government upset. In view of BoP scenario, the government seems to interested in taking soft loans from multilateral donor agencies- The World Bank, International Monetary Fund (IMF), Asian Development Bank ( ADB) etc..
According to media reports, Bangladesh export earnings was recorded around 40.53 billion US dollars during 2018-19 fiscal year ( FY). It decreased to 33.67 billion US dollars in 2019-20 FY. Import payment against export earnings is higher. So, the highest ever trade deficit has hit the country which is equal to 8.22 billion US dollars. Besides, inflow of foreign remittance declined by around 14.01% year on year to 1.50 billion US dollar in May, 2020 due to impact of Covid-19. Once upon a time, around 70% of the country’s import bills was addressed with foreign loans and grants. Have we forgotten those days? So, any decision regarding utilization of foreign currencies reserve has to be taken centering BoP situation.
Considering the current situation, foreign currencies reserve should be kept for rainy days. Post –Covid situation in Bangladesh would be worst, no doubt. Poverty rate was increased by close to 20% with rising unemployment rate in informal sectors due to coronavirus. Foreign remittance contributes more to bolster foreign currencies reserve in our economy. when corona came on earth as curse, the expatriates could not send remittance like before. Bangladesh received $1.18 billion remittance from March 01 to March 24. It was $ 1.45 billion in February 2020. To meet the growing demand for US currency in the market, the central bank has so far sold $529 million in FY 20 to the banks. Bangladesh Bank (BB) sources said a total of 59,139 people went abroad in February this year and sent $1452.20 million to Bangladesh as remittance where 69,988 workers in January and contributed in our economy by sending $1638.43 million.
The work order situation in export-oriented industries is truly vulnerable. In the month of March this year, $2.68 billion worth of export orders were cancelled and held up by global buyers affecting more 1.94 million workers. Speaking with a heavy heart that export growth fell by 5.31 per cent to $22.36 billion in the July –January period of current fiscal year, 2019-2020 from $23.61 billion in same period of FY19. On the other hand, import growth dropped by 4.43 percent to $ 32.00 billion from $33.49 billion. Bangladesh export earnings fell by 4.8 per cent in the first eight months of current fiscal year-to $26.24 billion from $27.56 billion in the same period of prior fiscal year. That should be explained here that February month of current fiscal year saw $3322.4 million but in July the export was recorded was $3887.9 million.
There is a possibility of losing jobs in Bangladesh to a great extent amid COVID-19 outbreak. Already, International Labor Organization (ILO) projected that more 25 million people are going to lose jobs globally due to coronavirus crises. Bangladesh is set to face ever first worst moment in the economy. Due to supply chain disruption, the producers and growers did not do marketing their products. Still now, corona situation was not improved. So, the need for undertaking a praiseworthy decision regarding utilization of foreign currencies reserve is a must.
The gulf countries have recently taken harsh plan regarding Bangladeshi workers. An oil-rich country- Kuwait decided to send 0.2 million workers back to Bangladesh following expatriate quota system that was recently approved. The competitors of Bangladesh- Cambodia and Vietnam are in a race to invite world reputed entrepreneurs. Bangladesh lags behind in diversifying export products compared to them. The need for find out export destinations for labor and products has become time-bound steps. If the state can move fast regarding manpower export in south African countries, the volume of foreign currencies reserve is on rise.
It is important to say that Bangladesh had been showing competitive performance in respect of fetching foreign currencies among South Asian region. There are no reasons to be worried regarding current reserve. But, the reserve should be kept for coming days to meet emergency need. Taking soft loans from donor agencies instead of foreign currencies reserve would be wise decisions one in this moment. The economies in the world are always able to show charismatic performance in emergency period with foreign currencies reserve. As Covid-19 attacked all economic areas, it takes time to be recovered. Now, we want to survive only. With foreign currencies reserve, expenses for development works would not be wise. Let us operate foreign currencies reserve carefully to address the need of the time.