Forex market unstable despite record reserves

Devise measures to diversify export markets

Published : 10 Sep 2021 07:53 PM | Updated : 11 Sep 2021 12:09 AM

The Foreign Exchange Market (FOREX) is unstable despite having record reserves. Experts opine that, the demand for US dollars have increased in the inter-bank forex market as the country's import demand picked up recently and the remittance inflow has declined as well.

The central bank should now intervene in the market to prevent devaluation of the greenback so that exporters and remitters reap benefits from the foreign exchange market by getting a higher dollar rate. It also helps boost inflow of remittance and export earnings.

The government should take more measures to increase the 

number of export sources which will lead to a stronger trade surplus

The Central Bank should purchase the excess supply of greenback which will decrease the value of Bangladeshi currency. If this did not happen and the value of currency appreciated against the dollar then it would negatively affect the exporters and remitters more.

However, amid the pandemic the main thing which helped to keep the market stable is the fascinating number of remittance inflow in the country. Rather than surging number of export earnings, the spike in remittance inflow has really boosted the Forex market. But we have to be aware that this kind of remittance inflow might not continue indefinitely. To sustain high remittance inflow, government should increase the remittance incentive so that the hundi channel gets discouraged for which government loses high amount of revenue.  

Therefore, government should take more measures to increase the number of export sources which will lead to a stronger trade surplus.