Unutilised earnings ballooning BB’s bag

Bangladesh’s foreign exchange (forex) reserves crossed the $19 billion mark for the first time on Wednesday, thanks to robust growth in export earnings and higher remittance inflow, according to Bangladesh Bank (BB).
With the forex reserve, the country would be able to pay import bills for more than seven months, said BB officials adding that this reserve would also help to keep the country’s foreign exchange market stable.
The country’s overall export grew by 15.08 per cent to reach $17.43 billion in the July-January period of the current fiscal (2013-14) compared to the corresponding period of the previous fiscal despite year-long political turmoil.
Bangladesh received US$ 1.25 billion as inward remittances in January 2014 which is the highest monthly inflow of remittance in the 2013-2014 fiscal.
The central bank’s foreign currency reserves crossed the US$ 10 billion-mark for the first time on December 10, 2009. It further stood at US$ 15 billion on May 7 last year and US$ 18 billion on December 19 the same year.
As per the international standards, a country must have the enough foreign currency reserves to settle at least three months’ import bills.
Although reserve hit record high, the country’s economic analysts expressed skeptical view about the benefit of the excessive forex reserve by the central bank.
They said an idle sitting surplus foreign exchange reserve is nothing but a burden for the economy when a sluggish investment climate prevailing in the country.
“Swelling forex reserve is nothing but an accumulation of unutilised resources,” former finance adviser of the caretaker government AB Mirza Azizul Islam told The New Nation yesterday.
He said, excessive reserve could be a matter of self-complacent for the central bank, but in my mind, it is burdensome for the economy until it utilise in the productive sectors.
“The country could reap benefit from the fat reserve only if it could bring to investment and economic activities,” he said.
The former finance adviser further said if the central bank fails to mange the reserve properly, it could push up inflation and lead to appreciation of the value of local currency. “It may significantly affect the export earnings and competitiveness of local goods in the global market,” he noted.
Commenting on the higher foreign exchange holding, Dr Salehuddin Ahmed, former Bangladesh Bank (BB) governor said, “It’s clearly too much and excess to our needs, and more importantly, it is damaging to the economy.”
 “I do not see any benefit of excess reserve on the economy whether it could be diverted to the productive sectors,” he added.
He said a country needs such a level of forex reserve which can cover three months of import payment. But, the current reserve at the BB stood to a level which could meet five months’ import payment. “So, such a high reserve holding by BB is nothing but a wasteful wealth,” he commented.
“It’s like an excess liquidity in the banks and if the liquid funds could not be channeled into investment it put downslide risks on the economy,” he mentioned.