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Taka slide brings a little cheer for major exporters
Higher imports, production costs to blame
REFAYET ULLAH MIRDHA and SOHEL PARVEZ
A falling local currency usually translates into higher earnings for exporters since their products become more competitive in the global markets.
From that sense, Bangladeshi exporters, who fetched a record $52.08 billion in the just-concluded fiscal year, should be over the moon since the taka has fallen more than 11 per cent against the US dollar in the past one year as the central bank loosened control over the exchange rate to rein in the depletion of foreign currency reserves.
But local exporters have not been able to cash in on the steep fall of the currency because of a surge in import costs of raw materials, unprecedented hike in shipping charges and runaway inflation, fuelled by the dragging coronavirus pandemic and the Russian war in Ukraine.
And it is the higher value-addition and lower dependence on imports that are making all the difference.
This means sectors such as jute, ceramics, leather, leather goods, agro-processing, vegetables, fish and fruits are benefiting more from the currency depreciation since their value-addition and retention are nearly 100 per cent.
On the other hand, the retention by garment exports, which account for about 85 per cent of the country’s earnings from the international markets, is 65 per cent, which translates into lower benefits for the country’s biggest foreign currency earner.
The depreciation of the taka had been a long-standing demand from exporters as they looked to gain more from a favourable exchange rate and to be more competitive in international trade.
In January this year, a dollar traded at Tk 86 in the banking channel and it rocketed to Tk 102 this week. The rate is Tk 105 in the kerb market.
But the slide came at a time when the import cost has skyrocketed. As a result, the benefit of the currency depreciation is not helping exporters much since the gain is largely being gobbled up by the higher cost of raw materials purchased from external sources.
Md Fazlul Hoque, managing director of Narayanganj-based Plummy Fashions Ltd, says he hasn’t benefitted significantly from the depreciation since he has to import raw materials at higher prices.
“Since international buyers are not raising the prices of goods and the cost of production has gone up, exporters have not been able to reap the maximum benefit from the fall of the taka.”
According to Hoque, the gain from the depreciation could be as high as 20 per cent whereas the production cost and the import value of raw materials have almost doubled.
In fact, the gain is almost the same as it was before the start of the currency’s slide since Hoque and other exporters were lagging when it comes to competitiveness in the global supply chain due to a stronger taka.
Garment manufacturers in the countries such as China, India and Pakistan that have their own raw materials are well-positioned to benefit more from their currency’s slide as the nations need not spend billions of dollars in import bills to make export-oriented finished goods, said the entrepreneur.
Echoing Hoque, Kutubuddin Ahmed, chairman of Envoy Textile, says since the company is importing raw materials at higher costs, it is not gaining much from the currency depreciation.
Kamruzzaman Kamal, marketing director of Pran-RFL, one of the biggest agro-processed food exporters in Bangladesh, says the local value-addition of agro-processed foods would be up to 80 per cent.
“So, we are benefiting from the taka’s depreciation.”