A terrible fear has surrounded around the world that 54 developing countries will be bankrupt in recent years. This statementwas given by the UNDP and Bangladesh was one of such countries which was also listed. Bankruptcy means that a country is unable to pay its debts and obligations. It is a serious situation that can have significant economic and social consequences. Most low-income countries have to depend on rich countries and various foreign organizations and banks for development. Then they have to repay that loan in different periods. A country defaults only when its economic and political deadlock creates and depletes its reserves. In the middle of last year, the war between Ukraine and Russia started, which affected the economy of countries all over the world. At that time, the price of various products including fuel oil increased in Bangladesh and the amount of reserve money of Bangladesh decreased a lot. At that time, the Sri Lankan government declared its bankruptcy. As a result, according to some economists, there are comments that Bangladesh is on the way to bankruptcy.
Bangladesh Foreign Reserve – What actually happened?
The main sources of foreign exchange reserves in Bangladesh are:
Remittances
Bangladesh receives a large amount of remittances from its citizens working abroad. According to the World Bank, the total remittances received in the country in the fiscal year 2021-2022 reached 2 thousand 103 million 17 million US dollars.
Export earnings
Bangladesh is known for its exports of garments, textiles, and jute products. The country earned around $33 billion from exports in the fiscal year 2020-21.
Foreign direct investment (FDI): Bangladesh has been attracting increasing levels of FDI in recent years, particularly in the energy, telecommunications, and manufacturing sectors. In the 2019-20 fiscal year, FDI inflows were $3.5 billion.
Aid and loans
Bangladesh receives aid and loans from international organizations such as the World Bank, the Asian Development Bank, and the International Monetary Fund.
Tourism
Although the tourism industry in Bangladesh is relatively small, it contributes to the country’s foreign exchange reserves. In 2019, the country received approximately $1.1 billion in tourism receipts.
The country’s foreign exchange reserves stood at $44.95 billion at the beginning of January 2021, which stood at $33.63 billion on January 4, 2022. The impact of the Russia-Ukraine war has disrupted global supply chains, forcing imports at higher prices. As a result, Bangladesh’s foreign exchange reserves have been decreasing since May 2022.
Has Bangladesh turned around successfully!
Bangladesh did not follow the path of Sri Lanka. Bangladesh has taken effective steps to avoid bankruptcy which has helped Bangladesh’s foreign exchange grow again. The first initiative taken to increase the foreign exchange was borrowing from the IMF. The IMF has decided to lend 4.7 billion USD to Bangladesh. The International Monetary Fund (IMF) provides loans on the condition of economic reforms. They say that foreign exchange reserves will increase continuously from the next financial year 2023-24. And by the end of the fiscal year 2026-27, the country’s reserves will exceed 50 billion dollars.
Besides, some other steps have been taken by the government, such as import control, multifaceted activities to encourage remittances through banking channels, continued growth of export earnings, quick loan waiver from International Monetary Fund and above all, the country’s foreign exchange reserves have started walking forward.
Want to read more blog click here https://ysseblog.com/plastic-free-july-embracing-sustainable-choices/
Written by:
Naeem Hasan
Intern, Content Writing Department
Youth School for Social Entrepreneurs (YSSE)