Prospects of Foreign Exchange Reserve - A Study on Bangladesh

Abstract

In recent days rapid accumulation of foreign exchange reserve leads to the rising interest in Bangladesh on the optimal utilization of its backlog. Though our foreign reserve holding is markedly higher which shows the sum of money is equivalent to seven months of import payments and sufficient to handle the country’s import bills for more than seven months in case of any emergency, but different approaches for foreign reserve adequacy level suggest the immediate steps to its best use unless it will contribute to a big liability in Bangladesh. There are heaps of investment opportunities in this emerging country, but cost-benefit analysis should be restrained in mind while placing the large store. The prospects of foreign exchange reserve focus in in infrastructural development, Export Development Fund, financial sector reform, limiting exchange rate flexibility, develop a manpower exports fund, liberalize the rules concerning outward FDI, buying gold from the IMF, mobilizing additional FX funds to open FX -dollar denominated- external account. Research on the different aspects of reserve accumulation is vast but little has been done in Bangladesh. Against this background, the purpose of the study is to cater a simple analysis of Bangladesh’s foreign exchange reserve, especially centering on the reserve position and prospects of it.