Forex reserve crosses $10b mark for first time
Thursday, 12 November 2009
FE Report
Foreign exchange reserve has crossed the $10 billion mark for the first time in the history of the country piggybacking on remittance, export growth and lower import.
"Entrepreneurs can get loan at easier term to import capital machinery and foreign investors can have more confidence in the economy due to huge foreign exchange reserve," said Bangladesh Bank Governor Atiur Rahman at a press conference Wednesday.
The country's capacity to face sudden catastrophes including food shortage will increase and Bangladesh will have more bargaining chips in negotiating for aids with its foreign counterparts due to high reserve, he explained.
"Hundi or informal channel of sending money has declined as the central bank allowed banks to open exchange houses in different locations including Kuala Lumpur, New York and London," he said adding "Bangladesh Bank has thrown a challenge to hundi traders and they are losing their business."
The huge foreign exchange reserve is helping
the country get better sovereign rating conducted by Standard and Poor and Moody's, he added.
The Governor said confidence of businessmen is growing and this reserve can help them in doing business.
"The investment situation was weak in the past but now there is a turnaround and the economy is picking up," he said.
"The country has excess production capacity now as the entrepreneurs imported capital machinery more than their requirement keeping future production prospect in mind. Thus capital machinery import has dropped but raw material import has increased in recent times," he added.
The central bank is planning to increase export retention quota for the exporters and the size of export development fund as it has huge foreign reserve, Dr Atiur said.
About the multilateral lending agencies' veiled warning about suspension of funding, he said problems with multilateral lending agencies can happen.
"The government will handle the situation keeping the national interest in mind," he added.
Deputy Governor of Bangladesh Bank Ziaul Hasan Siddiqui said with huge reserve the central bank now can offer innovative products which would help the economy.
"The central bank has recently allowed Pran Group and Apex Group to procure loans in foreign currency from local banks which could not be imagined even last year," he said.
From the reserve Bangladesh Bank deposited the loan amount in foreign currency with local banks at LIBOR plus 1 per cent and they lent it to business houses at LIBOR plus 3.5 per cent, he said.
"At present the LIBOR rate is 0.55 per cent and altogether the total interest cost is just over 4.0 per cent but if they procure the loan in local currency, it would cost them 13 per cent," he said.
Bangladesh Bank has started to open the door for getting loans in foreign currency for local business houses on case-by-case basis as it can afford to do so because it has an enormous reserve of foreign exchange, he explained.
Foreign companies can procure loans in foreign currency from the offshore banking units (OBU) but local companies are not allowed to take loans from the OBUs.
Foreign exchange reserve has crossed the $10 billion mark for the first time in the history of the country piggybacking on remittance, export growth and lower import.
"Entrepreneurs can get loan at easier term to import capital machinery and foreign investors can have more confidence in the economy due to huge foreign exchange reserve," said Bangladesh Bank Governor Atiur Rahman at a press conference Wednesday.
The country's capacity to face sudden catastrophes including food shortage will increase and Bangladesh will have more bargaining chips in negotiating for aids with its foreign counterparts due to high reserve, he explained.
"Hundi or informal channel of sending money has declined as the central bank allowed banks to open exchange houses in different locations including Kuala Lumpur, New York and London," he said adding "Bangladesh Bank has thrown a challenge to hundi traders and they are losing their business."
The huge foreign exchange reserve is helping
the country get better sovereign rating conducted by Standard and Poor and Moody's, he added.
The Governor said confidence of businessmen is growing and this reserve can help them in doing business.
"The investment situation was weak in the past but now there is a turnaround and the economy is picking up," he said.
"The country has excess production capacity now as the entrepreneurs imported capital machinery more than their requirement keeping future production prospect in mind. Thus capital machinery import has dropped but raw material import has increased in recent times," he added.
The central bank is planning to increase export retention quota for the exporters and the size of export development fund as it has huge foreign reserve, Dr Atiur said.
About the multilateral lending agencies' veiled warning about suspension of funding, he said problems with multilateral lending agencies can happen.
"The government will handle the situation keeping the national interest in mind," he added.
Deputy Governor of Bangladesh Bank Ziaul Hasan Siddiqui said with huge reserve the central bank now can offer innovative products which would help the economy.
"The central bank has recently allowed Pran Group and Apex Group to procure loans in foreign currency from local banks which could not be imagined even last year," he said.
From the reserve Bangladesh Bank deposited the loan amount in foreign currency with local banks at LIBOR plus 1 per cent and they lent it to business houses at LIBOR plus 3.5 per cent, he said.
"At present the LIBOR rate is 0.55 per cent and altogether the total interest cost is just over 4.0 per cent but if they procure the loan in local currency, it would cost them 13 per cent," he said.
Bangladesh Bank has started to open the door for getting loans in foreign currency for local business houses on case-by-case basis as it can afford to do so because it has an enormous reserve of foreign exchange, he explained.
Foreign companies can procure loans in foreign currency from the offshore banking units (OBU) but local companies are not allowed to take loans from the OBUs.