Bangladesh Bank Updates GDP Competitiveness Measure

Bangladesh Bank has announced a comprehensive update to one of the nation’s key foreign competitiveness indicators, the Real Effective Exchange Rate (REER). The revision incorporates several significant methodological changes aimed at reflecting the current economic realities more accurately.

For the first time, the updated REER calculation includes remittances from overseas workers, acknowledging their growing influence on the country’s foreign currency market. In addition, the base year of the index has been updated from 2015–16 to 2023–24, capturing a decade of shifts in trade flows, inflation differentials, and bilateral exchange rates.

Bangladesh Bank officials noted, “Earlier computations excluded certain components or assigned them inadequate weights. The revised methodology corrects these imbalances, resulting in a more realistic valuation of the taka, thereby enhancing its utility for policy-making.”

The composition of currencies in the REER basket has also been revised to reflect changes in Bangladesh’s trade geography. China has now overtaken India as the country’s largest trading partner, while a Middle Eastern country whose share fell below 1 per cent has been removed from the basket. The revised REER basket includes 17 currencies, collectively covering approximately 85 per cent of Bangladesh’s total trade.

Key Changes in REER Calculation

The revised methodology will take effect from December 2025. Updating the base year ensures that the index better mirrors current economic conditions, reducing discrepancies in economic assessments. Regional central banks also periodically update their REER base years; Pakistan and India, for instance, still use the 2015–16 base year.

REER serves as a vital indicator of a currency’s international competitiveness. A value above 100 indicates an overvalued taka, potentially affecting export performance, while a value below 100 signals currency depreciation and a relatively stronger competitive position. According to Bangladesh Bank, REER stood above 106 in November 2025, suggesting a modest overvaluation of the taka.

This updated REER is expected to provide policymakers, economists, and investors with a more accurate and integrated assessment of Bangladesh’s foreign competitiveness, supporting informed decision-making amid a rapidly evolving global economic landscape.