Bangladesh Balance of Payments Updates (Forex Reserve, Remittance, FDI, Balance of Trade, etc.)

[Destranator]

@waz @LeGenD Recommend making this a sticky for posting all Bangladesh Balance of Payments Updates to avoid the need for creating unnecessary new threads every 5 seconds.

Thanks.

Bangladesh forex reserves top $42 billion in pandemic

Bangladesh’s foreign currency reserves have reached another milestone despite the coronavirus pandemic.

bdnews24.com

Bangladesh forex reserves top $42 billion in pandemic
Bangladesh’s foreign currency reserves have reached another milestone despite the coronavirus pandemic.
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The forex reserves at the Bagnladesh Bank stood at $42.03 billion after the end of Tuesday’s business hours.
Kazi Saidur Rahman, a deputy governor of the central bank, said the achievement was possible mainly due to the remittances sent by Bangladeshis working abroad.
Growth in exports and foreign loans also contributed to the rise of the reserves, he added.
Zaid Bakht, a researcher at Bangladesh Institute of Development Studies, said that a drop in import also helped the forex reserves to grow.
“Such record-breaking reserves will give courage to the government to tackle the pandemic,” he said.
The reserves have increased by nearly $10 billion in a year. On Dec 15 last year, the reserves were $32.11 billion.
They crossed the $41 billion mark for the first time on Oct 29 but dropped again after the clearance of $1.15 billion import bills of September and October to the Asian Clearing Union on Nov 5.
With the current reserves, it is possible to clear import costs of over 10 months.

 

[mb444]

Reserves are not governments money to do as they will. Very silly post. High reserves are not always great. They have a tendency to increase inflation as rerserves forces a government to increase the supply of money unless the liquidity is used for other purposes.

 

[Destranator]

Reserves are not governments money to do as they will. Very silly post. High reserves are not always great. They have a tendency to increase inflation as rerserves forces a government to increase the supply of money unless the liquidity is used for other purposes.

Don't think the article is implying that the forex reserve is the government's money.
However, the level of reserves dictates import policy determinations. High level of reserves would allow the government to spend generously on covid vaccine imports through the usual import channels, for example.

It is not a correct notion that high reserves directly lead to inflation as the central bank has various tools in place to adjust monetary policy accordingly. Look up China and India's forex reserves as a proportion of their GDPs compared to ours. Are they experiencing crazy inflationary pressures?

It could only become a problem if say the forex reserve jumps to $500 billion overnight.

 

[mb444]

Don't think the article is implying that the forex reserve is the government's money.
However, the level of reserves dictates import policy determinations. High level of reserves would allow the government to spend generously on covid vaccine imports through the usual import channels, for example.

It is not a correct notion that high reserves directly lead to inflation as the central bank has various tools in place to adjust monetary policy accordingly. Look up China and India's forex reserves as a proportion of their GDPs compared to ours. Are they experiencing crazy inflationary pressures?

It could only become a problem if say the forex reserve jumps to $500 billion overnight.

Reserves forces increase in money supply in a country and therefore inflation. Only way to stop it it to raise interest rates. That will impact industrial growth.

BD economy is particularly susceptable to this problem due to our highly specialised export basket in this time of pandemic. Reserves are good as long the economy is operating normally but in a pandemic this is a liability. Think of it like this.... you dont have a job because you are sick, but the bank is forcing you to take loans. Its great you have loads on money in the bank but you can not go out to spend it and no means of paying back the interest that is accruing.

China and india are not comparable countries due to differing dynamics.

 

[Destranator]

Reserves forces increase in money supply in a country and therefore inflation. Only way to stop it it to raise interest rates. That will impact industrial growth.

BD economy is particularly susceptable to this problem due to our highly specialised export basket in this time of pandemic. Reserves are good as long the economy is operating normally but in a pandemic this is a liability. Think of it like this.... you dont have a job because you are sick, but the bank is forcing you to take loans. Its great you have loads on money in the bank but you can not go out to spend it and no means of paying back the interest that is accruing.

China and india are not comparable countries due to differing dynamics.

Bangladesh's forex reserves are not enough to pay even a year's worth of import bills and therefore any excess liquidity would taper down in no time. The scenario you are describing would be true if the forex reserve was multiplying rapidly.

 

[Bilal9]

I remember there was a ratio for GDP vs. Reserves.

Don't know where Bangladesh is vis-a-vis other countries in this category.

 

[mb444]

So BD has $42bn reserves. Its not bad but obviously could be better. Given where we are economically I think its adequate. Malaysia has over 100bn but it a petro dollar economy and vietnam 90bn whose economy is massively boosted by finishing chinese goods to bypass trading rules.

Our barometers should be the likes of indonesia with 135bn and turkey with 85bn... on that basis we have a lot of work to do.

 

[Destranator]

Remittance of over 10 billion dollars in 5 months

Staff Correspondent
Dhaka
Updated: 1 December 2020, 21:37

In October this year, over 2.11 billion dollars ( 211 crore 2 lakh 40 thousand dollars) was sent to the country as remittance. In November this dropped somewhat to around 2.08 billion dollars (207 crore 87 lakh 40 thousand dollars).
Foreign remittance is hitting a record. In the first five months of 2020-21 fiscal (July-November), remittance went up by 41.32 per cent. Another record is that this month the total remittance has crossed 10 billion dollars (1,000 crore dollars). In these five months, the remittance arriving in the country totaled around 10.90 billion dollars (1 thousand 90 crore 43 lakh 80 thousand dollars).
In November 2019, around 1.55 billion dollars (155 crore 5 lakh 30 thousand dollars) arrived in remittance. This was a growth of 33.66 per cent. In the first five months of the 2019-20 fiscal, remittance was around 7.77 billion dollars (771 crore 62 lakh 50 thousand dollars).
COVID-19 has hit the global economy hard. International trade has fallen. All international agencies had forecast a drop in remittance. It had been said initially there may be an increase, but this would not last because large numbers of migrant workers were losing their jobs and returning home. And many could not return to their place of employment and so this would have an impact in the future. However, the high inflow of remittance continues.
Bangladesh Bank spokesperson Sirajul Islam, speaking to Prothom Alo about the matter, said, “The expatriates are sending in record amounts of remittance every month. This will have a significant impact on the economy.”
He added, “With the added remittance, the banks are getting funds for investment and the foreign exchange reserves are hitting a record.”
The 2 per cent incentive has had a contribution to the increase in remittance. A 2 per cent cash incentive is being paid on remittance from 2019. This decision taken by finance minister AHM Mustafa Kamal has boosted the inflow of remittance. Some banks too are also offering an additional 1 per cent cash incentive from their own funds, also bringing in more remittance from the expatriates.
Over all, this record amount of remittance provides a relief to the economy in these coronavirus times. In October, a World Bank report had said that remittance would decrease globally due to the impact of Covid, but it would increase in Bangladesh. In the current year 2020, 20 billion dollars may come in remittance. Bangladesh will rank 8th in receiving remittance.
India ranks in the top place where remittance is concerned (76 billion dollars). China comes up second (60 billion dollars). Third place is taken by Mexico (41 billion dollars). But in proportion to the GDP, Bangladesh ranks fourth, remittance totaling 6.2 per cent of the GDP. Nepal ranks first with 23 per cent of the GDP, Pakistan second with 9.1 per cent, and Sri Lanka third, with remittance 8.2per cent of the GDP.

Remittance of over 10 billion dollars in 5 months

Remittance soars, boosting the economy and creating a record in foreign exchange reserves

en.prothomalo.com

 

[fallstuff]

oh ok, great, they started a scheme for people to send money by Govt channels is very popular.

 

[Destranator]

oh ok, great, they started a scheme for people to send money by Govt channels is very popular.

Yes it was a masterstroke by BAL govt. Full credit to them.

I hope we accelerate English and technical training of workers willing to migrate. This will boost working conditions and earnings by magnitudes.

 

[fallstuff]

Yes it was a masterstroke by BAL govt. Full credit to them.

I hope we accelerate English and technical training of workers willing to migrate. This will boost working conditions and earnings by magnitudes.

Offering 3% bonus did the majik touch.

 

[Destranator]

Offering 3% bonus did the majik touch.

2% but still very good.

 

[fallstuff]

2% but still very good.

Oops, my bad !!!

 

[bluesky]

Yes it was a masterstroke by BAL govt. Full credit to them.

I hope we accelerate English and technical training of workers willing to migrate. This will boost working conditions and earnings by magnitudes.

Should not the language be Arabic written and spoken when most of our people go to ME countries? I think you are talking about vocational training of various disciplines.

 

[Destranator]

Should not the language be Arabic written and spoken when most of our people go to ME countries? I think you are talking about vocational training of various disciplines.

Vocational training falls under technical training which I did mention.

As for language, English is an universal language.
I want Bangladeshis to transition away from unskilled labour work in the ME to skilled work (electricians, mechanics, fitters, plumbers, technicians, etc..) around the world including in East Asia, Europe, North America and Oceania where there is severe shortage. Even in the ME, major projects are largely run by foreigners who speak English to communicate among themselves.

The government will struggle to teach multiple languages so let us start with English which is the most useful.

In the past, I had suggested setting up at least one technical + language training institute certified to international standards in every upazilla by 2030. This will be challenging and require foreign technical and financial assistance but doable.

Besides developing local industries we also need to send several million skilled workers overseas if we ever want to become a developed country as we cannot create enough high paying jobs locally for such a huge population.

We have 10 million+ expatriate workers overseas, most of whom are unskilled.
Imagine if we could turn half of them into skilled workers earning an average (conservative) of say USD 40,000 and sending home on average $10,000 to Bangladesh. That alone is $50 billion in remittances.