Economy takes breather with better greenback inflow

Bangladesh’s economy has caught a temporary relief amid the external and internal pressures as exporters earn $5.14 billion and remitters send nearly $2 billion this January, while current account deficit narrows by $3 billion in the July-December period of FY23.

Besides, Bangladesh received the first installment of $476 million as part of the International Monetary Fund (IMF) loan of $4.7 billion, increasing forex reserves to $32.69 billion on Thursday.

Addressing the recent performance of exports, imports, and remittance trend, economists and the business community stated that it is a short relief for the economy, and Bangladesh should not become too complacent as the key challenges still remain.

Policy Research Institute (PRI) Executive Director Ahsan H Mansur told The Business Post, “Better performance in exports and remittance inflow is a good sign for the economy.

“But there are still challenges ahead of us, as we do not know how much we have to pay for deferred letters of credit (LCs) in the months ahead. Another challenge is the deficit in financial accounts in the first half of FY23.”

According to the balance of payment (BoP) data, the country’s financial account stood at negative $1.09 billion, which was positive $6.89 billion in the same period of FY22.

The medium and long-term loans also declined by 12.99 per cent to $3.5 billion during the July-December of FY23.

Export performance

Bangladesh’s exports earned $5.13 billion in January, retaining the $5 billion mark for the third consecutive month, while posting 9.81 per cent growth to $32.44 billion during the July-January period of the current FY.

Exports performed well riding on the RMG sector, while devaluation of Taka against the USD expedited the export growth, improving competitiveness in the global market.

According to Export Promotion Bureau (EPB) data, apparel exports rose by 14.31 per cent to $27.41 billion in the first seven months of FY23, compared to $23.98 billion compared year-on-year. In January, the sector earned $4.42 billion, and posted 8.24 per cent year-on-year growth.

It should be noted that major export sectors, excluding apparel, leather and plastic goods, had posted negative earnings during this period.

Research and Policy Integration for Development (RAPID) Chairman Mohammad Abdur Razzaque said, “As the global economy is facing trouble, Bangladesh’s export sector performance exceeded our expectations.

“It was possible because Bangladesh depreciated its local currency against the USD, which increased our competitiveness in the global market amid the high inflation and economic crisis. Besides, buyers are shifting from China, and most of them are switching to Bangladesh.”

He continued, “These factors helped us to retain growth amid the pandemic. Except for the readymade garment, our export market exposure is not that strong. This is why jute, home textile, agriculture and other sectors failed to cash in on the opportunity.

“The next five months will be the most important for us, and during the period, export earnings are likely to drop slightly. But it will go up after June this year. During this period, the government should take necessary steps to facilitate continuous growth.”

The central bank depreciated Taka against the USD by nearly 22 per cent last year, and left the exchange rate to the market.

Industry insiders say their overall export order trend is not good throughout the last four months, but the country has been receiving a good number of orders for woven items. Most of the orders are shifting from China, and it is also high-value.

Bangladesh Garment Manufacturers and Exporters Association (BGMEA) President Faruque Hassan said, “As we manufactured high-value items, our overall export figure is high. But most of the exporters, especially in the knitwear segment, are facing order shortages.

“We need an uninterrupted supply of gas and electricity at affordable prices. The government must ensure this at any cost, taking into consideration the country’s employment and foreign currency earnings.”

BGMEA Director Md Mohiuddin Rubel said, “As the global economic outlook indicates a slowdown in 2023 and global inflation hits record high, many challenges are waiting for us, and we need to prepare ourselves to face any unprecedented situation in the coming days.”

In the first seven months of FY23, the leather and leather goods sector posted a 7.37 per cent year-on-year growth, and earned $733 million, EPB data showed.

However, leather export earnings declined by 8.87 per cent to $77 million year-on-year. But leather products and leather footwear product exports rose by 22.23 per cent to $224 million and $432 million respectively.

Industry insiders say due to the Leather Working Group (LWG) certification issue, they failed to export domestic leather and leather goods to the western market.

“It will take another two to three years to get LWG certification. After that, we will be able to export in that market and our exports will jump exponentially,” Tajin Leather Corporation Managing Director Ashikur Rahman told The Business Post.

Remittance inflow trend

Bangladesh’s remittance income reached $1.96 billion this January, which is 14.92 per cent higher compared to the same month last year, show latest data from the Bangladesh Bank.

According to the regulator, remittance income increased by 4.25 per cent in the first seven months (July-January) of FY23, when compared year-on-year. The country earned $12.45 billion in July-January, which was $11.94 billion in the same period of FY22.

Current deficit situation

Bangladesh’s current account deficit narrowed in the first half of this fiscal year after several months mainly due to the slight fall in imports, and a surge in exports and remittance inflow.

The current account deficit stood at $5.2 billion in the first half of FY23, down from $8.2 billion compared year-on-year, according to Bangladesh Bank data.

Imports fell by 2.15 per cent to $38.13 billion during these six months because the central bank had taken a series of initiatives to discourage purchases of luxury products and services from the global market.