• November 22, 2024 11:24 am

Why has there been a decline in the foreign exchange reserves during the last three months?

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Published October 26, 2024
Why has there been a decline in the foreign exchange reserves during the last three months?

Md. Fahad Hossain Rana

According to the Bangladesh Bank’s monthly reserve data, there is a consistent decline

shown between the July to September. In July, the reserves stood at $25,823.60 million,
which dropped to $25,580.80 million in August, reflecting a decline of $242.80 million or –
0.94%. The decrease accelerated further in September, with reserves falling to $24,863.00
million, marking a sharper decline of $717.80 million or – 2.81%.
Reasons for this fall:
The primary reason for this decline is the lowest remittance inflow and a decline in RMG
exports. As remittance is the main source of earning foreign currency, in July the inflow was
only $1913.77 million US dollars, which was 24.61% less than the previous month. An
internet blackout due to the student’s quota reform movement accounts for this fall in
remittance. In the RMG industry, around 10% dropped in the work orders seen from
international retailers and brands for the autumn and winter seasons compared to the past
due to the nationwide student movement and labour unrest. There are several other
reasons for continuing the trend. Those are heavy import dependency and huge highinterest foreign debt taken by the former Awami League government.
Recommendations:
My recommendations for the government to stabilize the foreign exchange reserve are to
ensure full-fledged inflow remittance by reducing transaction costs and eliminating the
Hundi and illegal money transfer systems. The government should also strive to normalize
the political situation in the country and implement a strategy to enhance the business
environment for foreign investors by simplifying regulations, providing tax incentives, and
focusing on sectors with high FDI potential.
Written By,
Md. Fahad Hossain Rana
Student at Dept. of Economics,
Jaggannath University

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