Foreign Exchange Reserve

The foreign currency reserves of the banking sector in Bangladesh are influenced by several factors. These include:

1.  Trade Imbalance: A persistent trade deficit, where imports exceed exports, puts pressure on foreign currency reserve.

2.     High Import Dependency: Bangladesh’s heavy reliance on imported oil and gas, strains the foreign exchange reserves.

3.     Remittance Flows: Decreasing remittance flows can put pressure on the reserves.

4.     Global Economic Conditions: Factors like the Ukraine conflict can also affect foreign currency reserves.

5.     Foreign Debt:  Increasing foreign debt obligations further burden the foreign exchange reserves.

6.     Policy Interventions: Frequent policy changes related to foreign exchange management can create uncertainty and affect reserve levels.

7.     Exchange Rate Management: The gap between the official and unofficial exchange rates can also contribute to reserve depletion.

           How to overcome these problems:

1.                     * Increase Remittance inflows.

2.                     * Manage trade invoicing

3.                     * Foreign loan disbursement

4.                     * Reduce reliance on selling dollars from reserves.

5.                     * Manage import growth.

6.                     * Strengthen the banking sector.

7.                     Other measures:

·       Diversify foreign exchange holdings.

·       Develop alternative export markets.

·       Promote sustainable economic growth.