Bangladesh Foreign Exchange Reserves Surge Past $35 Billion

In a significant milestone for the nation’s recovering economy, Bangladesh’s gross foreign exchange reserves have once again breached the $35 billion threshold. According to the latest data released by the central bank, Bangladesh Bank, the reserves stood at $35.04 billion at the close of business on Tuesday. This resurgence mirrors a similar peak achieved in June 2020, though the underlying economic drivers differ substantially in the current climate.

A Comparative Analysis of Reserve Metrics

While the gross figure paints a robust picture, the central bank also reported figures aligned with the International Monetary Fund’s (IMF) BPM6 manual, which offers a more stringent accounting of "net" liquid assets. Under this methodology, the reserves currently stand at $30.30 billion.

The trajectory of the nation’s reserves has been a volatile one over the last five years. Following a historic peak in August 2021, the economy faced severe headwinds due to financial irregularities and capital flight, leading to a precipitous decline.

Drivers of the Recovery

The Governor of Bangladesh Bank, Ahsan H. Mansur, had previously predicted on 19 January that the $35 billion target would be reached within the 2025–26 fiscal year—even without relying on pending loan instalments from the IMF. This optimism appears well-founded, driven primarily by three factors:

Surge in Remittances: During the first 23 days of February, migrant workers sent home $2.56 billion, a 23% increase compared to the same period last year. This surge is attributed to the recent national elections and the upcoming Ramadan season.

Market-Driven Currency Policy: The interim government's decision to allow the Taka to float more freely has incentivised the use of legal banking channels over the informal Hundi system.

Strategic Dollar Purchases: With an influx of greenbacks into the private sector, Bangladesh Bank has purchased over $5 billion from commercial banks during this fiscal year, including $1.53 billion in February alone.

Future Outlook and Challenges

Economic analysts suggest that while the current buildup is impressive, it has been aided by a temporary stagnation in private investment. As the newly elected government takes office, a rise in demand for capital machinery and raw material imports is expected. Provided that the authorities remain vigilant against money laundering and continue to promote export-led growth, the current "dollar crisis" that plagued the previous two years may finally be relegated to history.