Reserves now record US$ 16 bln

[Jungibaaz]

BS what ?

BD*
Just a very unfortunate typo!

 

[Skies]

1. BB bought foreign currency from open market to stop devaluation of USD against Taka (because it will harm our export)

Since Awami govt is trying to maintain a fixed exchange rate, let's see the advantages and disadvantages of fixed exchange rate in context of BD.

pros:

1. Reduced risk in international trade
2. Stability encourages investment
3. Keep inflation Low


Cons:
1. Conflict with other macroeconomic objectives set by govt.
2. If the rate falls, to keep the exchange rate fixed, you can buy USD, but it's a short term measure.
3. If the rate falls, to keep the exchange rate fixed, you can increase interest rate on deposit, but higher interest rates will decrease the economic growth, and that could lead to a recession and rising unemployment.
4. Fixed exchange rates can lead to current account imbalances by automatic adjustment and effects on the domestic economy.
5. Large holdings of foreign exchange reserves required to maintain fixed exchange rate that incurs additional costs.
6. Loss of freedom in your internal policy, may adopt a policy which may not be best for the economy at that point.
7. Flexible rates will not eliminate the volatility [it does not help a country to cope with a sudden drop in the price of its exports or a surge of foreign capital] that emerging economies face, hence not suitable for emerging BD's economy.
8. In the long term, living with a fixed exchange rate demands wage and price flexibility. Flexible exchange rates is more appropriate in a sense that since it is independent of monetary policy, sometimes it could be less painful and thus desirable to adjust only one price (the exchange rate) than the whole set of prices of goods and wages of the economy, that are less flexible.


Comment: seems since AL has failed to create new industry, investment and jobs, now they are just trying to keep the export rate stable through using a Fixed exchange rate, and that will just do not increase any further unemployment for the time being, and the long run effects will be appeared in future. Otherwise, why there is no new job creation while forex reserve is so high?

 

[Yzd Khalifa]

Congratulations

Basically means that business in Bangladesh is at a stand still with no new investment ....

Not really. There's a great potential for BD.

 

[idune]

Congratulations

Not really. There's a great potential for BD.

Potential is one thing (which is there) BUT current stagnation in business and in investment is another. There is a sea of difference between two.

 

[Yzd Khalifa]

Potential is one thing (which is there) BUT current stagnation in business and in investment is another. There is a sea of difference between two.

With no potentials, there are no hopes.
There is a will, there is a way

 

[Anubis]

Is it better to have a reserve in USD or is it better to have a reserve in gold??

 

[monitor]

One of the main reason is our local investment has plummeted so no import of raw material or machine parts result a increased in reserve .

 

[idune]

More of Awami League Hocus Pocus reserve by hoarding dollars and claiming it achievement.

Fresh $576m BB dollar purchase takes reserve to $16b

The country’s foreign exchange reserves soared past $16-billion mark on Tuesday after Bangladesh Bank brought another $576 million in last one month amid slumping value of the dollar and dwindling import in poor business environment.The reserves, which raced past $15 billion in May after the central bank had brought around $4 billion in the previous 11 months, reached $16.03 billion on Tuesday.

Central bank officials said till Sunday the BB brought $576 million in the new financial year 2013-2014 beginning from July 1 after it had brought around $4.70 billion in the FY 13 to contain the falling value of the dollar against the taka.They said that the falling import payment, particularly that of capital machinery and industrial materials, also contributed to the swelling of the central bank reserves.

Fresh $576m BB dollar purchase takes reserve to $16b

 

[DURJOY]

great achievement for awamelige gvt.

 

[Skies]

great achievement for awamelige gvt.

LoL, Billboard Marka achievement, try guessing what is the ratio of rate of Forex reserve and rate of new job creation?

Due to lack of investment, the poor unemployment figures would probably weaken the currency in future. Remember: the Ghore Ghore Chakri?


Anyway, anyone look at the history tread of BD's reserve would see that the last 5 years reserve is very unusual compare to previous 10 years. As mentioned by @idune bro, it could be artificial as AL has severely failed to expand industrial growth, now they just do not want to hamper the export anymore.

In 2008 our reserve was 5.68 bn, and in 2009 after AL had came to power the reserve become close to double, that is, 10.21 bn. wow!