Reserve: Story of “Resurface from ground”
40 years ago during 1981-82 financial year, Bangladesh’s foreign exchange savings or reserve was only 121 million dollars. Now, the reserve is 38 billion dollars. Till Thursday’s (August 27, 2020) dawn the amount was exactly 38.40 billion dollars. In Bangladesh’s history, there wasn’t so much reserve ever. Export income and remittance from expatriates have raised the reserve gradually to this milestone.
But this long way of success hasn’t been smooth always. They stumbled so many times. They have faced problems while meeting import costs. Many a times, it has become a political issue; when the reserve used to go up, the government would use it as advertisement of their success, as it is being done now. On the other hand, if it reduced then the government had to face criticism from the opposition.
The government thought if the reserve comes down to bellow 1 billion dollars, it will ruin the image of our country. That’s why, for the first time in history in 2001 they were compelled to due Asian Clearing Union (ACU)’s import bill.
Bangladesh Bank officer says, during the government “Awami League” session 1996-2001, the reserve came down to almost 1 billion dollars. After this session, when advocate Lutfur Rahman took the responsibility of the government, there was a little more than 1 billion dollars in the reserve. At that time, they had to pay 200 million dollars to the Asian Clearing Union (ACU). But if they would pay the whole bill, the reserve would come below 1 billion dollars. That’s why; they paid 100 million dollars that time.
Central bank officer confirmed that, this was the only time when they kept ACU's bill due. According to international standards, every country needs to have reserve equal to the import bill of three months. Bangladesh had to pay the import bill after every two months. If we assume the import bill will be of 4 billion dollars every month then we can pay the bill of 9 and a half month with our recent reserved money.
From 1971 to 2020 it has been 49 years, after a few days it will be half a century. It is a huge time to judge a country’s improvement-deterioration, good-bad side. If we judge Bangladesh’s growth keeping only reserve in account then Bangladesh’s progression is massive.
Before liberation, Pakistan used to ask what you will eat. Will you be able to bear expenses of your food, clothing just by exporting tea, leather and fiber?? Even more grievous comment was made by USA’s foreign minister Henry Kissinger. He said -
“Bangladesh is a baseless basket”
But Bangladesh is not a baseless basket, in fact in many aspects Bangladesh has left Pakistan behind. It can be proven just by comparing both countries reserve amount. At the end of last July, Pakistan’s reserved amount was 18.95 billion dollars whereas Bangladesh’s reserve is of 38.4 billion dollars now. This information clearly shows, Bangladesh’s reserve is twice as much as in Pakistan.
There is no data preserved by the central bank about our foreign exchange savings (Reserve) of 10 years after the liberation. Maybe there wasn’t sufficient income through exporting at that point of time. Neither there was remittance nor foreign loan assistance at that time. That’s why, there wasn’t any foreign currency reserved.
From Bangladesh Bank’s data we can see that, during 1981-82 financial year foreign currency started to stock in Bangladesh Bank’s reserve. At the end of that financial year, there was 121 million dollars in reserve.
After 5 years, during 1986-87 financial year the reserve goes up to 715 million dollars. At the end of 1991-92 financial year, reserve crossed 1 billion dollars. In the very next financial year (1992-93) it crossed the line of 2 billion dollars and stood at 2.21 billion dollars.
From 1997-98 financial year to 1999-2000, it kept fluctuating between 1.5 to 2 billion dollars. During 2000-01 financial year it came down to near 1 billion dollars. At the end of 2001-02 financial year it goes up to 1.58 billion dollars. In 2005-06 financial year, it crossed 5 billion dollars. In 2009-10, the amount became 10 billion dollars. And in 2012-13 financial year it surpassed the line of 15 billion dollars. There was no looking back after this. This indicator of economy has progressed only.
On 10th April, 2014 we had a reserve of 20 billion dollars which became 25 billion dollars by 25th January, 2015. On June 2016 it crossed the border of 30 billion dollars for the first time.
In the interval of just 1.5 months, reserve has created record for 5 times. On last 3rd June, for the first time in history, the reserve crossed the milestone of 34 billion dollars. After the interval of 3 weeks on 24th June, it became 35 billion dollars. Exactly after 1 week the amount was 36 billion dollars on 30th June. After one month, on 28th July, it even crossed the line of 37 billion dollars. On 17th August, we had 38 billion dollars in our reserve. In 1.5 months only, the reserve has increased about 4 billion dollars. It was 34 billion dollars then and now its 38 billion dollars.
Finance minister A H M Mustafa Kamal is very delighted with this progress of reserve during this pandemic. He said that -
“Basically, the remittance sent by expatriates is the main reason behind all this records of reserve”
He has thanked expatriates for sending more and more remittance and keeping the economy growth going in this difficult time.
At the same time, he said -
“There is a big role of this government in this increment of remittance. To ensure that, the remittance is coming through legal ways, from the last year (2019) government started to give 2% incentive”
“It means if an expatriate sends 100 BDT, government will give them 102 BDT. This is encouraging expatriates to send money legally”
We need to keep in mind that, our reserve has increased because of our remittance. But decrement of import costs is also a big reason. After few days everything will start to be normal like before, if we don’t have sufficient remittance or bank loans like now, there will be a pressure on reserve.