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Bangladesh's foreign-exchange reserves may rise to US$30 billion in a gross account by June, up from the current stock of around $27 billion, in a steady economic rebound, predicts the Bangladesh Bank Governor.
While expressing such optimism Wednesday, Dr Ahsan H Mansur noted that getting to this goal would require improvements in the balance of payments, rise in net foreign assets, and reactivation of the economy through stronger remittance inflows, export earnings, and foreign financing.
The governor made the remarks while speaking as the chief guest at a dissemination event on 'Spatial and Historical Financial Development in Bangladesh', organised at a Dhaka hotel by the Policy Research Institute (PRI) in collaboration with the central bank.
"Some progress has already been made - reserves have started growing - and we expect them to rise further in the coming days," said the BB governor, Ahsan H Mansur, adding that the long-term goal is to raise reserves to $40 billion, although reaching that target will take time.
He stresses greater automation and reduced operating costs in financial institutions, warning that the microcredit system may not be sustainable in the long run due to the sector's high lending rates.
Dr Md Habibur Rahman, Deputy Governor of Bangladesh Bank, attended the event as the special guest, while Dr Nasiruddin Ahmed, former Chairman of the National Board of Revenue (NBR), and Anis Ur Rahman, Executive Director of Bangladesh Bank, also spoke at the event chaired by PRI Chairman Dr Zaidi Sattar.
Dr Ashikur Rahman, Principal Economist at the Policy Research Institute, delivered the keynote presentation at the event, shedding light on a stark inequality in financial access across Bangladesh.
He points out that just 1.0 per cent of loan-account-holders receive 75 per cent of all loans nationwide, while 78 per cent of total lending is concentrated in Dhaka and Chattogram.
Despite decades of bank expansion, he mentions, private banks remain heavily concentrated in the more affluent eastern belt, indicating a lack of outreach to poorer regions.
"In effect, there is circumstantial evidence suggesting that private banks are not banking to the poor," he remarks.
"This research offers the first spatially disaggregated, longitudinal view of banking development in Bangladesh, revealing the invisible gaps that national averages often hide, said Dr Zaidi Sattar.
He emphasizes that financial development must be inclusive, and to achieve that, it is essential to identify and understand where the truly underserved populations are.
Dr Nasiruddin Ahmed said Bangladesh's financial system is under strain due to a high ratio of non-performing loans relative to the total loan volume.
He notes that both the banking and revenue systems are grappling with similar challenges rooted in governance issues, which "must be addressed before undertaking any effective policy mapping".
Citing the example of Amtali Upazila in Barguna, Anis Ur Rahman noted that while the number of deposit accounts in the area doubled, the number of loan accounts declined.
He points out that deposits from regions like Amtali are being channelled as loans to Dhaka and Chattogram, which hinders local development.
"Where is the money coming from, and who is using it?" He questions about an evident financial disparity.
Dr Ahsan H Mansur said over Tk 2.80 trillion had been laundered out from the banking system in the way of depleting foreign-exchange reserves worth $28 billion from $48 billion to $20 billion.
"Where did this money go? It has left the system. This is why our deposit growth is sluggish," the governor told his audience.
Marking the situation as the biggest obstacle for the economy he said printing money to cover this deficit will raise inflation further.
He notes that slow deposit growth and high interest rates indicate a significant outflow of money from the banking system, leading to a liquidity crisis.
Ahsan Mansur blames widespread corruption, irregularities, and unplanned activities under the previous government for the situation and says there is no quick fix for these problems.
He hopes to raise foreign-exchange reserves as quickly as possible, which would require improvements in the balance of payments, an increase in net foreign assets, and a revival of the economy through higher remittances, exports, and foreign financing.
He notes that some progress has already been made, with reserves beginning to recover, and expressed optimism that they would continue to grow.
The microcredit system in the country will not sustain for a longer period competing with banking system as banking system being expanded through low- cost sub-branch system and agent banking system.
He says they would not need to make the comparison themselves - the market would speak for itself.
If agent banking offers loans at an interest rate of 13-14 per cent, he questions why people would choose to borrow at 26-percent interest from microcredit agencies.
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