Revenue from both remittance and exports falls

At a point of time when the country's foreign currency reserves are on a decline, there has been a drop in both remittance and export revenue. This fall in revenue from the country's two major sources of foreign currency has caused concern.

Bangladesh Bank and the Export Promotion Bureau (EPB) on Sunday published a report on remittance and export revenue. The report revealed that the remittance that came in last month, September, was the lowest in the last seven months. It had fallen by 24 per cent from the previous month (August). Compared to the corresponding month of last year, the rate of decrease is around 10 per cent.

Export revenue has fallen by 6.25 per cent compared to September last year. After an upward curve for 13 consecutive months, export revenue has fallen.

Concerned persons say that living expenses have increased in Europe due to the high inflation there. As a result, expatriates are sending in less remittance home. For the same reason, purchase orders for export goods have also decreased. On top of that, production at factories has fallen due to the gas and power crisis.

Some quarters also feel that fixing two rates on the dollar for remittance and exports has also had a negative impact on remittance.

Sri Lanka fell into its crisis because it did not have adequate foreign exchange to import goods or to pay its foreign debts. Pakistan is facing the same predicament

Broadly speaking, there are three major sources of foreign exchange in the country. These are the export sector, remittance and foreign loans, investment and grants. If remittance and export revenue increases, so does foreign exchange reserves, and this increases the country's capacity. Sri Lanka fell into a crisis because it did not have adequate foreign exchange to import goods or to pay its foreign debts. Pakistan is facing the same predicament.

Bangladesh's foreign exchange reserves at present stand at just over USD 36 billion (USD 3600 crore). This is enough to meet four months' import costs. Generally speaking, foreign currency reserves enough to meet three months' import costs are considered satisfactory. But the cause of concern is that the reserves are falling. In August last year even the reserves were of USD 48 billion (USD 4800 crore). After Russia-Ukraine broke out last year, the prices of commodities went up in the global market, pushing up import costs.

Over the past few days, the dollar rate has been around Tk 105. The dollar crisis has abated somewhat, but now there are reports of exports and remittance falling. State minister for planning, Shamsul Alam, however, has said that one should not draw conclusions from the ups and downs of just one month. Speaking to Prothom Alo, he said that if this trend persists for three consecutive months, then it will be a matter of concern. It is normal for such figures to rise and fall from month to month.

Remittance USD 1.54 billion

In FY2021-22 remittance to the country totalled USD 22.03 billion (USD 2,203 crore). That means the monthly remittance on average was around USD 1.75 billion (USD 175 crore). Last month, however, the expatriates sent USD 1.54 billion (USD 154 crore), the lowest in seven months. The month before, August, USD 2.03 billion (USD 203 crore) came in by way of remittance.

The dollar crisis in the country began from April this year. After that, the banks began to spend more on procuring dollars. As a result, the dollar that would cost Tk 86, shot up to Tk 115.

Bangladesh Bank took several measures to control the dollar rate. These measures were all more or less ineffective. At the start of last month, the responsibility to fix the dollar rate was left to the banks. Since 12 September, the dollar rate has been determined by the Association of Bankers Bangladesh (ABB), comprising the top executives of the banks, and by Bangladesh Foreign Exchange Authorised Dealers Association (BFEADA).

In the case of foreign remittance, the dollar rate is now Tk 107.50 and in the case of export revenue, the ceiling is Tk 99.

Speaking to Prothom Alo, former managing director of Pubali Bank, Abdul Halim Chowdhury, said during the corona outbreak, a special allowance would be paid in the US for those with no work. That has now been stopped. Also, last month the dollar rate fluctuated. This has brought down remittance. But this will normalise.

Why exports are falling

After the first and second wave of coronavirus, the export sector recovered well. There had been positive growth in exports for 13 consecutive months. But it finally has hit a snag. In September commodities of USD 3.91 billion (USD 391 crore) were exported. This was 6.25 per cent less than September last year.

Overall, the export trend remains positive. In the first three months (July-September) of the current 2022-23 fiscal, commodities of USD 12.5 billion (USD 1,250 crore) were exported. This is 13 per cent higher than the corresponding period last year.

From EPB records, it can be seen that basically the 7.5 per cent fall in export of readymade garments has caused the negative growth in the overall exports last month. Exports of home textiles and agro products have also fallen. The export of leather and leather products as well as jute and jute products has increased.

Concerning the decrease in readymade garment exports, president of the apex body of readymade garment industry owners BGMEA, Faruque Hassan, told Prothom Alo, the inflow of new purchase orders has fallen in the last three months. A few large buyers have suspended quite a few orders. Also, the factories were unable to deliver all their export orders due to the gas and power crisis. He said, "We hope that the positive trend in exports will be restored in December. Orders are coming in and the government has assured us that the gas and power problems will soon be resolved."

'Stability essential'

The business community is waiting to see where the dollar stabilises. Sales and purchase, commodity prices, import and investment plans, all depend on the dollar rate. The rate of the dollar, in turn, depends on export revenue, remittance and imports.

Executive director of the non-government Policy Research Institute (PRI), Ahsan H Mansur, said it is difficult to pinpoint exactly why remittance has fallen. But the remittance houses that collect the remittance that comes in, may be hoarding the dollars. Also, remittance from expatriates in Europe and America may have fallen. He said, in these circumstances, Bangladesh bank can sell dollars to the banks. The remittance houses will not be able to hold on to the dollars for more than a month. They are bound to sell these.

Ahsan Mansur said, the fall in remittance is temporary. This may increase in the coming months. A big gap has been created between the dollar rate for remittance and for export revenue. These rates must be equalised. This will restore stability in the dollar market. It is essential now to restore stability in this market.