Export earnings and remittance inflow, two key sources of foreign currency in Bangladesh, have recorded a substantial fall for the second consecutive month in October, escalating the prevailing tension over the shrinking forex reserve.
The central bank disclosed the remittance data and the Export Promotion Bureau (EPB) revealed the trend of export earnings for the month of October.
According to the Bangladesh Bank (BB) data, the remittance inflow dipped to an eight-month low and registered a 7.37 per cent year-on-year fall in October.
At the same time, the export earnings plunged nearly 8 per cent in October, compared to the corresponding month of the previous year.
Earlier, the export earnings rose in 13 months at a stretch, until it posted a slight fall in September. Still, the income from exports rose 11 per cent in October if it is compared to the previous month.
However, the exporters cast doubt over the EPB figures.
Export earnings and remittances are now under special focus as the country’s forex reserve has been shrinking gradually. It pushed up the dollar price, which is the main cause behind the hike in commodity prices. The dwindling forex reserve is indirectly responsible for the load shedding the country has been going through for the last several months. Different banks are facing difficulties while opening letters of credit (LCs) for importing commodities.
According to the central bank data, the forex reserve is now USD 35.7 billion. The country will have to pay some import liabilities to the Asian Clearing Union (ACU) this month, which may squeeze the reserve further to USD 34 billion. The reserve was a bit more than USD 48 billion in August last year.
Mustafizur Rahman, distinguished fellow of the Center for Policy Dialogue (CPD), told Prothom Alo, “Income from export and expatriates is a source of grave concern in the present context. The amount of purchase orders in the apparel industry has also decreased. Hence, the expatriate income should be emphasized. Besides, attention should be given on how the dollars are being spent.”
He cited a statement of the chief of Bangladesh Financial Intelligence Unit (BFIU) that products were imported at an additional price of up to 200 per cent.
“What was their punishment? How the Bangladeshis have come out on top in buying homes in Dubai. How did the money go out?” Mustafizur asked.
However, he appreciated the hike in dollar price in case of expatriate income and said it would raise remittance inflow in the coming days.
Garments owners are ‘surprised’
The current financial year had a good start in terms of commodity exports as products worth USD 8.59 billion were exported in the first two months. The year-on-year growth rate was estimated at 25 per cent during the period.
But the exports started to plunge in September. The country bagged earnings of USD 4.35 billion from exports, but witnessed an year-on-year fall of 7.85 per cent.
However, the overall export earnings in the first four months (July-October) of the current fiscal year are still higher compared to that of the previous fiscal. Bangladesh exported products worth USD 16.85 billion in the four months, with a 7 per cent growth. The apparel products make up more than 80 per cent of the country’s total exports. The overall exports tend to be positive if exports of RMG products increase. But there was an exception in October when the export of apparel products rose, but the overall exports fell.
Bangladesh earned an amount of USD 4.36 billion from exports in October where the RMG products contributed USD 3.68 billion, with an year-on-year growth of 3.27 per cent.
However, the BGMEA and BKMEA leaders were literally shocked by the rise in earnings from apparel exports in October. They regularly monitor the volume of RMG products exported through the Chattogram sea port and Dhaka airport.
The export of apparel products was down by 18 per cent in the first 20 days of the last month, compared to the previous year’s same period. The gap was around 15 to 16 per cent as of 28 October. But the EPB calculation showed the earnings to have risen in the month.
BGMEA vice president Shahidullah Azim said, “We are surprised to see the positive growth in garment exports. But we are happy." In response to a question, he said, “The gas and electricity situation has not improved. The purchase orders did not increase also. There is no work in many factories.”
BKMEA executive president Mohammad Hatem said nothing happened that may pull up the export of apparel products. Still the exports rose. It is seemingly unusual.
“I do not see any chance for the situation to improve before next December-January,” he added.
According to the EPB data, exports of leather and leather products increased by more than 17 per cent, along with RMG products. On the flip side, the exports of agro-processed products, frozen food, jute and jute products decreased during the period.
Remittance also declines
Overseas incomes have been declining ever since the dollar was pegged. The expatriate Bangladeshis remitted foreign currencies equal to USD 1.52 billion in October, which is 7.37 per cent less than the same period a year ago. It fell by more than 10 per cent in the previous month, September.
Bangladesh received a total of USD 7.2 billion in remittance in the first four months of the current fiscal, which is 2 per cent higher than the previous year. The individuals concerned said the central bank and commercial banks are taking decisions frequently regarding the dollar price. It had a negative bearing on the remittance inflow.
The officials of the Malaysian and Italian exchange houses said they find no dollar to buy at a price higher than Tk 107. But the hundis are offering Tk 109 against each dollar. As a result, the expatriate Bangladeshis are not turning to the exchange houses to send large amounts home.
Former president of Dhaka Chamber of Commerce and Industry (DCCI) Abul Kasem Khan said, “We cannot increase the source of foreign exchange overnight. Therefore, it should be done whatever is necessary to increase remittance. "
Necessary gas, electricity and other facilities should be ensured to the exporters, he said, adding that spending foreign currency in non-productive sectors should also be stopped strictly.