Currency convertibility refers to how easily a country's currency can be exchanged for foreign currencies like the dollar or euro.
There are two main dimensions: Current Account Convertibility (freely converting currency for trade in goods and services, remittances) and Capital Account Convertibility (freely converting currency for investments, loans, and financial asset purchases).
High convertibility encourages international trade and investment. However, full capital account convertibility can increase risks of capital flight and financial instability.
Bangladesh achieved current account convertibility in 1994 — the taka can be freely converted for trade transactions. However, full capital account convertibility has not yet been achieved.