Bangladesh's foreign exchange reserves reached a record high of $37 billion in the month of June as the Central Bank data shows in the current fiscal 2020-21.
Why is Bangladesh’s Forex Reserve on a record high?
There are multiple macro and microeconomic factors. Few prominent factors are:
Bangladesh and Remittances
Remittances contribute about 5.6% to Bangladesh’s total GDP. Bangladesh has enjoyed a steady flow of remittances from its overseas workers that have helped rebuild its economy. The top countries that send remittances to Bangladesh are the Kingdom of Saudi Arabia, the United States, United Arab Emitres, Malaysia, Oman, and the United Kingdom amongst others.
Despite the grim predictions by the World Bank due to the job losses and economic fallout caused by the pandemic, Bangladesh received another $2.6 billion in the month of July as the Central Bank of Bangladesh’s data shows.
Bangladesh is one of the hardest-hit economies by the Coronavirus pandemic. The pandemic had dried its main forex contributing sectors which are the Readymade Garment industry and the Overseas Workers. The government has been instantaneous in providing incentives and sectoral stimulus packages to offset the impact of the pandemic on its economy.
The rise on forex reserves is welcomed and a much-needed relief. The forex reserve is at a sound level to support Bangladesh's resilience to external impacts to maintain macroeconomic stability in light of the COVID-19 outbreak.
Prime Minister Sheikh Hasina has shown optimism to explore the practicality of borrowing funds or taking loans utilizing forex reserves to support the long road to economic recovery.