Mitigating Bangladesh's foreign exchange crisis

Bangladesh has recently seen a sharp increase in import bills, primarily due to rising international commodity prices and increased consumption of raw materials. Export earnings have also been affected, particularly due to fluctuations in the global economy and disruptions in value chains. This imbalance has placed significant pressure on the country's foreign exchange reserves, affecting the balance of payments, currency stabilisation efforts, and international trade.

With foreign reserves depleting, the value of Taka has fallen, stoking inflation. The economic strain is making imports more expensive, pushing up the prices of essential goods such as food, capital machinery and inputs. This inflationary trend poses a serious threat to the general population, increasing the risk of social unrest. To address this issue, the government must adopt a comprehensive strategy covering several key areas.

First, it is essential to make the export structure more competitive through diversification and adding value to products. Diversifying into high-value, less economically sensitive exports could help mitigate the adverse effects of global economic fluctuations.

Second, attracting foreign direct investment (FDI) can strengthen the country's foreign reserves. Improvements in the business environment-through better regulation, infrastructure, and investor-friendly policies-are crucial. Additionally, enhancing the efficiency of remittance flow channels can further support foreign exchange reserves.

Lastly, sound monetary and fiscal policies must be adopted to address the current issues. Focusing public expenditure on productive areas, while balancing interest rates and inflation, will help stabilise the economy. To resolve foreign exchange crisis there is need for improving exports, attracting investment, boosting remittances, and adopting prudent economic policies.

Abdullah Al Kader

Student

North South University

[email protected]