Bangladesh Bank has revised the Real Effective Exchange Rate (REER), a key indicator of the country’s external competitiveness, to better reflect the current economic realities. The updated calculation incorporates several important changes designed to make the measure more accurate and policy-relevant.
For the first time, the revised REER includes remittances from expatriate workers, highlighting the growing impact of these inflows on the foreign exchange market. Additionally, the base year for the index has been updated from 2015–16 to 2023–24, capturing a decade of changes in trade patterns, inflation rates, and bilateral exchange rates.
Bangladesh Bank officials explained, “Previous calculations omitted some critical components or assigned them insufficient weight. The new methodology adjusts these weights, making the currency valuation more realistic and usable for policy analysis.”
The composition of the REER basket has also been updated to reflect shifts in Bangladesh’s trade geography. China has now overtaken India as the country’s largest trading partner, while one Middle Eastern country has been removed from the basket due to its trade share falling below 1 per cent. The revised basket includes 17 currencies, covering over 85 per cent of the nation’s total trade.
Key Changes in the REER Basket
| Feature | Previous Base Year (2015–16) | New Base Year (2023–24) |
|---|---|---|
| Base Year | 2015–16 | 2023–24 |
| Inclusion of Remittances | No | Yes |
| Largest Trading Partner | India | China |
| Number of Currencies | 17 | 17 |
| Trade Coverage | ≈85% of total trade | ≈85% of total trade |
The new REER methodology will be implemented starting December 2025. Choosing 2023–24 as the base year ensures that the index more accurately reflects the current economic situation and reduces data discrepancies.
Other central banks in the region also periodically update their REER base years. Currently, Pakistan and India continue to use 2015–16 as their reference period.
The REER serves as a critical indicator of a currency’s external competitiveness. A reading above 100 suggests the local currency is overvalued, potentially affecting exports, while a value below 100 signals depreciation and stronger international competitiveness. According to Bangladesh Bank data, Bangladesh’s REER exceeded 106 in November 2025, indicating that the taka remains slightly overvalued.
This revision is expected to provide policymakers, economists, and investors with a more realistic and comprehensive measure of Bangladesh’s external competitiveness in a rapidly evolving global economy.