Foreign direct investment- a possible solution to support Our FOREX reserve

Abstract

Developing and middle income countries are the best destinations of MNCs if they have sound geographical location, sufficient labor force, business friendly infrastructures, transparent bureaucratic system, flexible rules and regulations (or policies) for investors, and so on. Bangladesh is such a country who has most of these resources and one of the best destinations for FDI’s. However, currently our country is facing problem like- insufficient FOREX reserve to support necessary transactions for a long period of time. Though there are so many ways to earn foreign currencies but, FDI is one of the best possible solution to earn a healthy amount of foreign currencies. Hence, the government should take necessary initiatives to bring more FDIs in our country. Since, we have a sound economic growth 7.5% in FY2022 (expected) which is 1.5% greater than our neighbor India. Nonetheless, of having a sound economic growth it has an average trade deficit of $6.84 billion approximately (based on the data of year 1990-2020). It also has a large import expenses compare to export income which are approximately $25.11 billion and $17.24 billion consecutively (average of year 1990-2020). Therefore, to support its economic activities, and to support its FOREX reserve, the respective authority should attract foreign investors to invest in this country. However, due to current geopolitical situation USD’s rate is fluctuating significantly against BDT. Hence, in this paper I have assumed- USD 1 = BDT 103.50 (November 7th 2022, Exchange Rate of Taka, Bangladesh Bank) to accomplish necessary calculation.