Remittances drive Bangladesh forex reserves past $38bn in pandemic

Bangladesh's foreign currency reserves have crossed the $38-billion mark for the first time amid the coronavirus pandemic.

The central bank's foreign reserves reached the milestone on Monday thanks to a robust growth in inward remittances after Eid-ul-Azha.

The uptick in remittances saw the foreign reserves swell by $4 billion in the space of one and half months to reach a record high of $38 billion.

Confirming the development on Monday, Finance Minister AHM Mustafa Kamal told bdnews24.com: "The foreign exchange reserves are setting one record after another, relying mainly on the remittances sent by expatriates."

He expressed his gratitude to the expatriates for their role in keeping the country's economy afloat as it continues to grapple with the pandemic.

"The government has also played a big role in increasing inward remittances. The government introduced a 2 percent cash incentive in July last to encourage the inflow of remittances through legal channels on the prime minister's orders."

"This means that if an expatriate sends Tk 100, the government is adding two takas on top of it and so their relatives are getting Tk 102. This is encouraging expatriates to send more money back home."

However, economic analysts believe one of the main reasons for the inflow of remittances through legal avenues is that the pandemic has put a stop to Hundi or illegal channels to send money.

On Jun 3, the foreign reserves crossed $34 billion for the first time after Bangladesh received a $732 million fund from the IMF. It crossed the milestone of $35 billion three weeks later on Jun 24.

The foreign reserves subsequently surged past $37 on Jul 28 before hitting the latest high three weeks later.

"This leap in reserves gives us courage. We hope to tackle the pandemic with this courage,” said Kamal.

Besides remittances, funds from the World Bank, IMF, Asian Development Bank, and Asian Infrastructure Investment Bank also played a role in pushing the foreign currency reserves over $38 billion.

Lenders have provided almost $3.5 billion in loans in the last four months (April-July), which have bolstered the foreign reserves.