Bangladesh Bank Training Academy Journal

Abstract

This paper focuses on the benefits of openness by trade and financial liberalization on economic growth in Bangladesh. We have analyzed historical developments of major macroeconomic variables and presented charts and statistical tables. We observe that Bangladesh has had impressive growth in exports, remittances and foreign exchange reserve along with strong macroeconomic fundamental in recent years. This paper finds that trade and financial liberalization promote economic growth in Bangladesh; the degree of country’s openness in terms of trade share increased to 47 per cent in FY14 from 18 per cent in 1970s. Country’s exports enlarged to USD 30 billion (21% of GDP) in FY14 from USD 0.46 billion (around 3% of GDP) in 1970s. FDI inflows also has accelerated along with the increasing trend of remittances inflows. The country experienced surplus current account balance since FY02 except for a deficit recorded in FY11 and FY12. Nevertheless, foreign reserve position rose to the comfortabl level at USD 21.56 billion at end June 2014 that is equivalent of 6 months of import payments from USD 1.6 billion at the end of FY00 (equivalent of 2 months of imports). These developments reveal that trade and financial liberalization encourage economic activities that accelerate country’s GDP growth.