Foreign Exchange reserve likely to get worst hit during the year 2020

Due to a declining export earnings and remittance flow during the current economic fallout, the
foreign exchange reserve will experience a sharp decline in the coming year. The current reserve
amount of $39.09 billion is expected to cover the import payments. Even though the import bill
has shrunk significantly due to the pandemic, the reserve amount will not be able to cover the
impending reserve shock.

The export and import figures will likely show a negative value over the coming months. It is
very crucial to maintain the reserve amount by the central bank. Cash incentives could be
increased to boost the remittance flow, export destinations should be diversified very soon and
central bank should cut back on selling foreign currency to other banks for now. Also, buying of
heavy machinery and luxurious products needs to be slowed down to stop reserves from
depleting. This might seem counter productive since it will slow down the industry sector, but
considering the current situation, this will prevent further recession.

The balance of payment will incur a further negative value due to this. With the opening of the
economy, this foreign exchange shortage will be felt more. Our foreign exchange regime is
considered as independently floating rates, but now, the government should intervene and
depreciate BDT to instigate export earnings but also keeping in mind of the interest rate, inflation
and import amounts.

Nevertheless, the power generating industries are receiving opportunities to import raw materials
like heavy furnace oil, but to avail such credit facility, power-generating entities must have
specific requirements.

Furthermore, the central bank has resumed purchasing the US dollar from the commercial banks,
to protect the interests of exporters and migrant workers by keeping the exchange rate of the
local currency against the greenback stable.