Order to repatriate dollars 'stuck' overseas

A part of the export revenue has been stuck abroad. Bangladesh Bank officials assume that nearly USD 1 billion has been held overseas for the last two years. Experts say that this money has been laundered. Now the Bangladesh Bank has ordered to return that money back to the country. However, economists doubt the outcome of this initiative.

Earlier, the central bank ordered to monetise 50 per cent of the foreign currency from the export retention quota (ERQ) in the quickest possible time. The central bank officials expect that these initiatives will increase the dollar supply in the market. Now the banks are not being able to supply dollars as per the demand. Therefore issuance of new letters of credits has dwindled. The Bangladesh Bank officials think the pressure on reserve will decrease once the dollars from the export revenue return to the country. If the export proceeds do not reach the country within 120 days, this is considered as money laundering.

However, officials affiliated with the banking sector feel that the crisis won’t be resolved with these initiatives unless the price of dollars is left to the market. They say there is no alternative to let the market fix the price of the dollars. Remittance, another source of foreign exchange, has declined due to the low price of dollars.

Speaking to Prothom Alo, Ahsan H Mansur, executive director of the private research organisation Policy Research Institute (PRI) said, “When the money doesn’t return from abroad, it is considered money laundering. Now no one will bring money to the country easily. Stern legal action should be taken. The supply will increase slightly for a month as a result of the in cash of dollars by the exporters. However, those who will sell dollars now will be in trouble in future.”

Bangladesh Bank has been taking different initiatives to evade the dollar crisis. Lastly, it fined the treasury heads of 10 banks for selling dollars at a higher rate. Those 10 officials have appealed to the central bank against the fine. Now the board of directors of the Bangladesh Bank will take the decision regarding them. Monday was the last day of paying the fine.

Speaking regarding this, Ahsan H Mansur said, “The main problem is the price of dollars is not market-based. Instead of taking action against corruption and money laundering, they are busy with the people selling dollars at a higher price. It will encourage the big criminals.”

A portion of the export earnings is not coming into the country on time. So the Bangladesh Bank wants to realise this income to ease the dollar crisis. However, many have closed the business. Some have left the country.

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 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 export 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 this money stuck abroad can be repatriated speedily.

Besides, exporters can hold some of their earnings in the exporters' retention quota (ERQ) account. Currently, the figure amounts to about 650 million and Bangladesh Bank ordered exporters to encash 50 per cent of all foreign currency held in relevant ERQ accounts. The central bank expects this move will increase the dollar supply in the banks.

In a letter to the banks, the central bank said 50 per cent of the foreign currency held in ERQ accounts can be retained and the remaining 50 per cent will have to be encashed with traditional exchange rate. Thus, Bangladesh Bank expects this initiative will inject a supply of USD 300 million into the markets.

As banks, currently, are buying remittance and export earnings at Tk 110 a dollar, exporters will receive a similar exchange rate for foreign currency held in ERQ accounts.

Mutual Trust Bank managing director Syed Mahbubur Rahman told Prothom Alo, “These decisions will increase the supply of foreign currency slightly. We are trying to mitigate the dollar crisis, but we are not getting remittances at a price that we want to purchase. As a result, it has not been possible to open a letter of credit (LC) as per the demand.”

The dollar crisis that began in March is still on with the exchange rate of the US dollar soaring to Tk 110.50 a dollar from Tk 87 a dollar during this period. Yet, the dollar is not available as per the demand. It has been learned businesses and tycoons who own banks enjoy privileges. Opening of LC fell by 18 per cent to USD 105 billion in July-August this year, which was USD 1.28 billion in the similar period of the previous year, while settlement of LC dropped by more than 22 per cent during this period.

Meanwhile, according to Bangladesh Bank, foreign currency reserves fell by 9.70 billion to USD 26.70 billion this year from 36.40 billion in 2022.

Bangladesh Bank officials said banks saw a rise in dollar supply. They said banks saw less supply of dollars than demand a year ago, as a result, dollar retention turned negative. Currently, most of the banks have an adequate supply of dollars with dollar retention rising to USD 3.30 billion.

The dollar crisis hit the kerb market after the licenses of seven money changers were revoked. Most of the money changers in Dhaka allegedly stopped selling dollars, increasing the exchange rate of the US dollar to Tk 119-120 a dollar. However, Bangladesh Bank said banks still hold USD 29 million and customers can purchase those.

Bangladesh Bank executive director and spokesperson Mezbaul Haque said the exchange rate of dollars remains higher at the kerb market, but dollars can be purchased at a lower exchange rate from banks. Initiatives have been taken to increase the supply of dollars in banks. Besides, the inflow of remittance is also on the rise, if this trend continues pressure on foreign exchange reserves will lessen, and the situation in the dollar market will improve, he added.

Mezbaul Haque the country received USD 698 million in remittances in the first 100 days of this month, and the figure was USD 615 million during the same period of the previous year.

Some people, however, welcomed the initiative to repatriate the export proceeds held in foreign countries amid the ongoing dollar crisis. Still, they fear how effective this initiative will be because those who laundered money showing trade misinvoicing will never want to bring back the money home.

Former president of Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) Fazlul Haque told Prothom Alo on Thursday night this decision is applicable perfectly to those who laundered money through trade misinvoicing. Bangladesh Bank set 31 October as the deadline to repatriate the dollars even though export earrings include from both fiscal years ending June 2022 and June 2023. So, it was not prudent to set the same deadline for both cases. Besides, many buyer companies delayed payment in the current global situation, resulting in the late arrival of export earnings. In this case, it will not be possible to bring back the money by force, so, the matter will have to be settled in some cases.

This report appeared in the print and online edition of Prothom Alo and has been rewritten in English by Ashish Basu and Hasanul Banna