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No cheer from export and remittance
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for dollars, so when you fix the official dollar rate at Tk 110 -- when the unofficial rate is Tk 118 -- you won’t get dollar at that rate,” said Zahid Hussain, a former lead economist of the World Bank’s Dhaka office.
Remittance is falling due to policy weakness of the central bank, said Salehuddin Ahmed, a former BB governor.
“You are fuelling expectations by raising the rate by 50 paisa to Tk 1 frequently. Only if the central bank can convey that it will allow the market fundamentals to work would the exchange rate stabilise. It is quite difficult to quash prolonged expectations,” Razzaque said.
In the monetary policy announced in July, there was a commitment to shift to a market-based exchange rate in September. But that has not happened.
Subsequently, Hussain recommended treating the BAFEDA-set exchange rate as a guideline while allowing all to negotiate the best rate for themselves. In that way, the exchange rate premium will narrow down.
“There has been no big change in conditions in September for remittance to drop so much from August. The only difference is strict enforcement of the BAFEDA rate,” he added.
This has diverted remittance to the unofficial channel, also known as hundi.
The authorities need to tackle the unofficial channel from both the demand and supply sides with expediency, said Mustafizur Rahman, distinguished fellow at the Centre for Policy Dialogue, while citing Pakistan’s success in this matter as a case in point.
“As long as you don’t touch hundi, nothing will work,” said Syed Mahbubur Rahman, the managing director and chief executive officer of Mutual Trust Bank.
The demand for hundi has increased too for various reasons. One of the reasons is capital flight centring on the polls scheduled for January, and that group is inelastic to the exchange rate.
“We have been increasing the rates, but we are seeing no impact. Even after import curbs, we are in want of dollars for opening letters of credit,” said Rahman, also a former chairman of ABB.
Hussain of the WB said: “This is like a cat-and-mouse game.”
Export, though, is providing some source of solace, at least on paper.
September’s receipts take the total received in the first quarter of the fiscal year to $13.7 billion, up 9.5 percent year-on-year but still fell short of the periodic target by about $300 million.
Garment, the main export earner, raked in $3.6 billion, up 12.5 percent year-on-year.
The brands and retailers are paying higher unit prices for Bangladesh’s garment products in keeping with the higher prices of raw materials, said Faruque Hassan, president of the Bangladesh Garment Manufacturers and Exporters Association.
The garment makers are also sending more and more value-added high-end garment items that fetch more money, he added.
Shipments of leather and leather goods, another big export earner, raked $72.7 million in September, down 30.6 percent year-on-year.
“Leather and leather goods are non-essential items and this is why the consumers are buying less of them during this period of economic volatility,” said Md. Saiful Islam, former president of Leathergoods and Footwear Manufacturers & Exporters Association of Bangladesh.
The traditional big earner jute and jute goods fetched $81.4 million last month, down 8.6 percent year-on-year.
Bangladesh mainly focuses on jute sacks and jute yarn and demand for those has fallen worldwide, said Md. Abul Hossain, president of the Bangladesh Jute Mills Association.
Home textile exports brought home $64.4 million, down 24.2 percent year-on-year, as gas price hikes ate into the local manufacturers’ competitiveness in the global market.