Home ›› 26 Oct 2022 ›› Opinion
The deficit in import-export trade is increasing day by day. As a result, the size of the current account deficit is also increasing. Foreign exchange reserves are decreasing day by day. Dollar market is quite unstable right now. It has depreciated from Tk 86 to Tk 106 per dollar in the last few months, i.e. more than 23 per cent. The price of goods has increased several times more than that. The middle class and lower middle class are in the midst of a crisis. The authorities must deal with the situation promptly; it is time to prepare in advance to deal with possible depression and even famine.
In this context, it has to be said that until now the experts and government officials who were laying the storyline that ‘there is nothing to fear about the country’s economy’, are now also hearing the warning signs of famine, hearing about the coming of the depression. Even among them now the fear of famine is at work, looking for a way to deal with famine inside. The government is trying to get loans from different countries and organizations and running behind the IMF.
Broadly, there are three sources of foreign exchange in the country’s economy: export sector, repatriation income and foreign loans, investment and grants. Based on the economic report of September of this year, let’s see the current status of the mentioned sectors and what needs to be done.
There was hope for Bangladesh - the country’s large population of around 100 million working abroad regularly remit foreign exchange. There has always been and still is an inflow of foreign exchange. Still, it was being said that remittance flow is decreasing and will go away because bankers set the dollar value of remittances on the central bank’s advice. Earlier, every dollar was spent to fetch TK 114 to 115. Suddenly on September 11, the remittance dollar was pegged at Tk 108. And the export dollar is fixed at Tk 99. However, on September 26, the dollar value of remittances was further reduced by Tk 0.5 to 107.5. Basically, since then, the remittance flow has been seen to decrease.
According to the statistics of Bangladesh Bank, in September of this year, remittances came to the country 1,539 million dollars, while in the previous month, i.e. August was 2,036 million dollars. The remittances in September are less than in August by about 24.5 per cent. And in September of last year came 1 thousand 726 million dollars, which is about 11 per cent less than in September of this year. Depreciation of the dollar was expected to reduce the flow of remittances. And this is the reality in the farewell month. Why is the price of remittance fixed - the bankers said that the dollar price is constantly increasing because the supply is less than the demand.
Bangladesh Bank took various steps to control the dollar price. But it didn’t work. At the beginning of last month, the responsibility of setting the rate of the currency was left to the banks. Association of Bankers Bangladesh (ABB), the association of top executives of banks and Bangladesh Foreign Exchange Authorized Dealers Association (BAFEDA), the association of banks involved in foreign exchange business, have been jointly determining the price of the dollar since September 12. In the case of expatriate income, the dollar price is now Tk 107.5, and in case of product export income, the highest price is given at TK 99 when the country’s foreign exchange reserves decline, exports and repatriation incomes also decline. Declining earnings from the two main sources of foreign exchange have created fresh concerns. Bangladesh Bank and Export Development Bureau released the expatriate income and export accounts for September. It can be seen that the amount of expatriate income received in September is the lowest in the last seven months. This income has decreased by 24 per cent compared to the previous month. If compared with the same month last year, it can be seen that the rate of decrease is about 10.5 per cent.
Garment exporters say they have cut back on clothing purchases due to abnormally high inflation in the United States and Europe, two of Bangladesh’s main garment markets. According to the Association of Made Garment Manufacturers (BGME), on the decline in exports, the pace of new purchase orders for garments has been slow for the past three months. A few major buyers have suspended several purchase orders. Due to the same reason, the purchase orders for the export of goods have decreased. The entrepreneurs could not export all the purchase orders due to the gas and electricity crisis.
To reduce the pressure on foreign exchange, the central bank is implementing various measures to control the import costs. LC margin has been waived on imports of most products. In other words, the importers must pay 100 per cent of the cost of importing products. At the same time, the central bank is supervising the opening of LCs for imports of goods worth 3 million dollars. However, the growth in import expenditure remained at 17 per cent in July-August, while the growth was 45 per cent in June last year. As a result, despite import controls, there was a record trade deficit in two months. The trade deficit widened further in September.
Stability of the dollar rate is essential. Traders are waiting for the dollar situation to stabilize. Because buying and selling, product prices, imports and investment plans depend on the price of the dollar. Meanwhile, the import cost of almost all products, including daily commodities, raw materials, industrial equipment, etc., has increased by 20 to 30 per cent due to the rise in dollar prices. Prices of construction materials, spare parts and industrial raw materials have increased. In the current situation, it is not unusual for the dollar to rise against the taka.
The most important thing to deal with the current situation is to restore socio-economic stability and deal with the situation together. Importing goods necessary for production must not be controlled; Rather, it is required to control the import of only luxury goods and less or unnecessary goods. Efforts to find alternative markets for export products, prevent corruption and money laundering and bring back laundered money should be continued. Besides, it is necessary to find a new labour market, facilitate sending workers abroad and eliminate corruption. Foreign travel of government should be stopped without urgent need. Treatment abroad should be reduced by improving the country’s medical system.
The writer is a banker. He can be contacted at [email protected]
