Net foreign investment declines 35% in Oct-Dec 2022
Net foreign direct investment (FDI) in the country fell by 35.56% in the last quarter (October-December) of 2022 compared to the previous quarter due to the ongoing foreign exchange crisis in the country, according to the latest report of the Bangladesh Bank.
Central bank data shows that foreign net investment in the last quarter of 2022 amounted to $703 million, which was $1,100 million in the previous quarter.
Net foreign investment is calculated by excluding dividends taken by foreign companies from the total foreign investment.
People concerned said investments in Bangladesh were showing a slight increase after the normalisation of the Covid-19 situation. However, due to the Russia-Ukraine war and the subsequent global inflation, central banks of several countries have raised interest rates, leading foreign investors to countries with higher rates.
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As a result, Bangladesh has experienced a decrease in foreign investments, they said.
Foreign net investment in Bangladesh increased by 20.18% in 2022 compared to 2021, reaching $3,479 million from $2,895 million.
According to the Bangladesh Bank, the country's foreign exchange reserves stood at $31.06 billion as of 26 April 2023, which was $44.06 billion on the same day of 2022. The amount of foreign exchange reserves decreased by more than $13 billion in one year.
A senior central bank official, speaking on the condition of anonymity, said that the country's dollar market experienced significant turbulence during the last quarter of the previous year. The inability to make international payments, coupled with reports of various banks experiencing a dollar crisis, had an impact on foreign investment.
He said, "The first instalment of the $4.5 billion IMF loan was disbursed in January. We expect foreign investment will continue to increase from the next quarter."
Ahsan H Mansur, executive director of Policy Research Institute, told The Business Standard that since July last year, the impact of the dollar crisis in Bangladesh has increased, leading to a decrease in foreign investment compared to other countries.
However, if the Federal Reserve rate decreases and the exchange rate of the US dollar in Bangladesh returns to the market rate, the amount of foreign investment is likely to increase, he said.
Remittances inflow declined by 19.44% in April compared to the same period last year due to a weaker dollar rate.
The amount of total remittances was $1.68 billion in April, about $350 million less than the previous month, according to the central bank.
The country received $17.71 billion in remittance in the first 10 months of FY23, which is $409 million higher compared to that of the previous year.
Yet, the foreign exchange reserves of the country have been on the decline as the central bank has been selling dollars to commercial banks to meet necessary import costs. It has so far sold foreign currencies worth $11.83 billion in this fiscal.
The Metropolitan Chamber of Commerce and Industry, in its December quarterly economic review, said the wages of workers in Bangladesh are significantly low, which is an attracting factor for higher foreign direct investments. Yet, the country continues to fail to draw expected amounts of FDI.
Shortage of power and energy, weak transmission infrastructure, lack of land for industry, lack of transparency, corruption and irregularities are also blamed for lower foreign investments to the country.
