The country witnessed a rise in exports, as well as a drop in export earnings in the first quarter (July-September) of the 2023-24 fiscal (FY2), prolonging the ongoing dollar crisis.
As the country has been receiving the export revenue at the end of the stipulated 120 days instead of the usual time of 40-50 days, export earnings fell by USD 3 billion in Q1 of the current fiscal.
Recently, Bangladesh Bank governor Abdur Rauf Talukder sat with the top officials of several banks, where the bankers were instructed to bring export earnings home on a regular basis.
Bankers said the exchange rate of US dollars for imports has been rising by Tk 1-0.5 a dollar every month, and exporters expect the currency rate is rise further in the coming months. Besides, many are stacking the export earnings outside the country because of political instability, and all these factors contributed to the fall in export earrings, as well as the prolonged dollar crisis.
Meanwhile, about USD 1 billion of export earnings, according to Bangladesh Bank, is yet to be repatriated within the 31 October deadline set by the central bank to encash the export precedes.
State of the Q1
Earnings from exports stood at USD 10 billion in July-September of the 2023-24 fiscal, which was USD 3 billion less than the export earnings of USD 13 billion received in the corresponding period of the 2022-23 fiscal.
Overall, exports increased in the current fiscal as exports of goods rose by 9.5 per cent to USD 13.68 billion in Q1 of FY24 from USD 12.49 billion in the corresponding period of the previous fiscal.
However, exporters are not receiving their earnings in the month they shipped products, resulting in a disruption in the dollar supply to the markets.
Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) executive president Mohamamd Hatem told Prothom Alo,"If the data on export is true, then that revenue will surely arrive. However, it is necessary to ensure the data on the export first. Besides, buyers are sending money on time. It can also not be denied that there are 10-20 unscrupulous businessmen, and for these reasons, earnings from exports dropped. We sought a list of them from Bangladesh Bank, but we did not get it. Had we received it, we would have taken action."
Both exports, earnings drop
Data from Bangladesh Bank shows Premier Bank is one of the top ten banks involved in export business. Exports through the channels of this bank fell to about USD 540 million in July-September of FY 24 from USD 650 million in the corresponding period of the previous fiscal. Receipts of export proceeds through Premier Bank also fell to USD 460 million in July-September of the 2023-24 fiscal and from USD 580 million in the corresponding period of the previous fiscal.
Another private bank United Commercial Bank also witnessed a drop in the repatriation of export proceeds as exports through the channels of this bank fell to USD 720 million from USD 920 million during this period. Receipts of export proceeds also dropped. Most of the banks including Islami Bank also witnessed a downtrend.
As a result, earnings from exports decreased, yet data from the government showed exports were on the rise.
Bangladesh Bank executive director and spokesperson Mezbaul Haque told Prohom Alo nobody understands why export earnings are not coming as much previously. Banks were told to look after the matter during the meeting between the central bank and bank officials. It is necessary to maintain the inflow of export earnings to increase the supply of dollars, he added.
Dollar price behind the scenes
Currently, two associations of bankers -- the Bangladesh Foreign Exchange Dealers Association (BAFEDA) and the Association of Bankers Bangladesh (ABB) – decide the exchange rate, though they are mainly responsible for implementing the decisions of the Bangladesh Bank.
The exchange rate of the US dollar for imports increased by Tk 3 a dollar to Tk 110.50 a dollar in October from Tk 107.50 a dollar in July last. As a result, exporters who shipped products in June are receiving Tk 3 more per dollar now.
As per Bangladesh Bank's rules, businesses must bring export proceeds home within 120 days of exporting products, or else they will require the opening of a new letter of credit (LC) to export products next time.
The exchange rate of the US dollar changes every month, with the dollar price being raised several times in a single month. Many businesses are not bringing their export earnings home in the hope of a higher exchange rate of the US dollar in the coming days.
A top exporter said on condition of anonymity, “I am getting Tk 5 more per dollar after bringing the exports earnings in 10-10 days late. Who would not want to take this advantage? It is okay to bring the export proceeds home by the stipulated time of 120 days. Previously, I brought the money in 40-50 days, but now I bring it on the very last day."
Islami Bank managing director Mohammed Monirul Moula told Prothom Alo export earnings are arriving a bit late. Perhaps, some businesses bring the money home lately in a planned way. Once the dollar prices become stable, export earnings will return to the previous state because there will be no opportunity to make extra profits, he added.
USD 100 billion yet to arrive
A portion of export proceeds is not coming home. According to Bangladesh Bank officials, export proceeds of USD 10 billion have remained stuck in foreign countries over the past two years, and banks have been instructed to bring back this non-repatriated money home.
Economists, however, are doubtful over how much the central bank’s initiative would be effective
In a letter sent to the banks on 2 October, the Bangladesh Bank said the entire export earnings in 2021-22 and 2022-23 fiscals must be brought back to the country through the exporters within 31 October. Actions will be taken against the concerned persons in case they fail to repatriate them within the stipulated time as per the Foreign Exchange Control Act. It has been learnt that there is a provision to file cases under this law. As per the law, the money has to be repatriated within 120 days of export.
According to the sources in the Bangladesh Bank, the amount of non-repatriated money is nearly USD 1 billion. However, it includes export proceedings related to counterfeiting, fake exports and bankruptcy of buying agencies.
The central bank officials say it includes the fake export bills of Hallmark, Bismillah and Crescent Group. Besides, money has also been stuck with several buying agencies which went bankrupt during the coronavirus pandemic.
Cases are on over these issues abroad. Therefore, it will take time to bring the entire amount of money back to the country. However, at least half of the USD 10 billion stuck abroad can be repatriated speedily.
Before this, the central bank ordered the exporters to encash 50 per cent of the foreign currency held in the exporters' retention quota (ERQ) accounts within the shortest possible time. Central bank officials expected this initiative would inject a supply of dollars into the markets. However, banks have been unable to exchange currencies as per demand, resulting in a fall in the opening of LCs.
According to Bangladesh Bank, pressure will lessen on foreign currency reserves once earnings from exports come home, and earnings from exports do not arrive in the country within 120 days is considered money laundering.
People concerned from the banking sector think the central bank's initiatives would not mitigate the crisis unless the introduction of the market-based exchange rate. There is no alternative to launching a market-based exchange rate to increase the supply of dollars.
This report appeared in the print and online editions of Prothom Alo and has been rewritten in English by Hasanul Banna