Dollar Crisis Boosts Reinvested Earnings But New FDI Falls

Economic Tag: FDI

In FY23, Bangladesh experienced a record surge in reinvested earnings by foreign companies, reaching $2.37 billion, marking a 16% increase compared to the previous year. Meanwhile, fresh investments, categorized as equity capital, dropped significantly to below $796 million from $1.35 billion in the preceding fiscal year.

This decline in fresh investments led to an overall 7% decrease in foreign direct investment (FDI) into the country, totaling $3.19 billion. The primary factor driving the increase in reinvested earnings was the ongoing dollar crisis, making it challenging for foreign companies to repatriate their profits due to a shortage of the US dollar in the country.

Simultaneously, reduced fresh investments were influenced by deteriorating economic indicators such as forex reserves, macroeconomic stability, and inflation. The taka’s devaluation by over 30% during this period further added to the challenging economic environment. To stimulate increased FDI, experts recommend addressing issues like delays in obtaining various permissions and services, which can deter foreign investors.

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