Bangladesh in better position than Sri Lanka, Pakistan to navigate forex crisis
The common fear regarding if Bangladesh is next in line for an unmanageable economic crisis like its neighboring peers Sri Lanka and Pakistan, has been cautiously busted by the analysts at UCB Asset Management.
In its most recent report 'Is Bangladesh Mirroring Sri Lanka and Pakistan?', the local asset manager said Bangladesh is in a much better position to navigate the foreign exchange crisis.
Keeping in mind the ongoing dollar austerity, the analysts estimate, Bangladesh will spend around 14.1 billion US dollar for its most essential imports of fuel and fertilizer and the external debt servicing in 2023 assuming there will not be a major deviation in commodity and fertilizer prices and short-term FX debt obligation from current estimation. And, with a mere 3% annual growth the country should end the year with 22 billion US dollar in remittance inflow.
The 7.9 billion dollar difference would help offset the trade deficit the government aims to curtail through halting nonessential imports so that the forex reserve does not drop too much from the current level of over $3 bn dollar in gross or over 25 bn dollar in net as of December 2022.
On the other hand, the reserves of Pakistan and Sri Lanka have already dropped to 5.6bn dollar and 1.7 bn dollar as of December 2022, respectively.
Bangladesh has foreign currency to pay the import bills over the 4.9 months, while import coverage for Pakistan and Sri Lanka now stands at 1.6 and 1 months respectively.
According to the report, the value of one dollar (on relative purchasing power parity basis) in 2022 was 533 Lankan Rupee, 226.4 Pakistani Rupee or 119.6 Taka, while they actually were at 367, 226.5 and 106 respectively.
The Pakistani Rupee suffered a massive depreciation in January 2023 as soon as the rates were floated.
Food sufficiency, low energy consumption per capita, some fertilizer production locally, a bigger export earning, high remittance inflow, all are helping Bangladesh stay much ahead of the two neighbors, according to According to the report, .
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