Dollar supply has increased due to reduced smuggling in Bangladesh, some relief in foreign exchange management
In recent times, dollar smuggling from the country in the name of import-export and through online banking channels has reduced to a large extent. At the same time export income, remittance flow increased, import expenditure decreased. Inflow of foreign donations has also started to increase. All these costs have decreased slightly compared to foreign exchange income. Also the trend of depleting foreign exchange reserves has also decreased. Foreign exchange reserves have remained stable for the past two weeks. As a result, partial relief has returned to foreign exchange management.
These data have been obtained by analyzing the latest report prepared by Bangladesh Bank on the overall economic situation of the country. Before this, there is a severe dollar crisis in the country for the last two and a half years. The dollar price has increased from 85 taka to 120 taka. Even at that price, the dollar is getting less now. Having to buy imported dollars at higher prices.
According to sources, since mid-July, due to the students’ agitation, there was a standstill in the transactions in the banking sector. At that time, as the rate of LC opening in banks decreased, foreign transactions also decreased. It has also reduced money laundering. After the fall of the Awami League government on August 5, the new government took over on August 8. From that time, the banking sector imposed restrictions on transactions. This has also reduced the smuggling of foreign currency so far. However, there has been some smuggling of cash in foreign currency and local currency. Besides, no large amount of foreign currency was smuggled through the bank. On the contrary, the flow of foreign currency in the country increased during that time. Strong steps have been taken by the central bank to bring export earnings to the country. As a result, the income in this sector is increasing. Foreign exchange earnings from June exports are now coming into the country. The price of exported products before and after this is also coming. Export income has increased to a record amount. In June, the country’s export income reached a record amount of 7.13 billion dollars. Which is more than any time in the past. Earlier in January, the export income reached the highest of 572 million dollars. Since then, monthly revenue has exceeded $5 billion till March. Since April, this income has fallen below 5 billion dollars. Export income in May reached 3.67 billion dollars. It more than doubled to $7.13 billion in June.
A message has gone out among exporters that dollar inflows will increase after the new government takes over. In this, the price of the dollar may decrease rather than increase in the future. With such a message, exporters have started bringing dollars into the country. The bulk of the dollar inflows in June were due to export earnings.
According to the information obtained from the report, the import-export income was 4 thousand 447 million dollars in the last financial year. It was 4 thousand 336 million dollars in the previous financial year 2022-23. During the period under discussion, the export income increased to 111 million dollars. 2.56 percent as a percentage.
The excess of export earnings shown has now been eliminated. As a result, export earnings fell by 6 percent during July-May. Earnings grew by more than 2.5 percent in June.
The flow of remittances has also started increasing now. Remittances came in at $191 million in July amid volatility. Remittance flow is increasing this August. This month may exceed 200 million dollars.
Foreign grant inflows have also started to increase. In the last fiscal year 2022-23, grants fell by 23 percent. Last financial year it decreased by 4 percent. Donations have started to increase in recent times. Foreign development partners are showing interest in providing support to various projects, especially due to floods and support to the new government.
Meanwhile, steps have been taken to increase foreign investment. In the last financial year, foreign investment has reached 1.7 billion dollars. Which is 5 million dollars more than the previous financial year.
In a press conference at the central bank on Wednesday, the governor of the central bank said. Ahsan H. Mansoor said, to deal with the dollar crisis, initiatives have been taken to collect an additional 1 billion dollars from the Asian Development Bank and JICA, 1.5 billion dollars from the World Bank and 3 billion dollars from the IMF in addition to the current package.
According to sources, the supply of dollars from these sectors will increase its flow in the market. As a result, the dollar crisis will be over and the foreign exchange market will stabilize. On the one hand, it will reduce the pressure on the value of money. On the other hand, it will be possible to strengthen the production sector. Liquidity crisis will also reduce. Through this, inflationary pressure will also reduce a little.
According to the data obtained from the Central Bank report, the import expenditure in the fiscal year 2022-23 was 7 thousand 75 million dollars. In the last financial year, it decreased to 6 thousand 324 million dollars. During that period, the cost of imports decreased by 7.51 billion dollars. 10.61 percent as a percentage. However, the pressure of foreign debt repayment is increasing. Now dollar supply banks are collecting remittances to pay off past dues. Dollars are usually not issued from central bank reserves. Instead of increasing export earnings and remittance flows, the central bank is now buying dollars from the market. As a result the reserves have stabilized. Reserves did not fall in August. did not increase is stable. Out of this, foreign debt and import liabilities are being paid. Currently, the reserve is 2048 million dollars. With which 4.4 months of import expenses can be met.
An official of the central bank said that there is a big pressure on the reserve if the product does not arrive in the country even after the debt is paid after opening the import LC. That is, when dollars are smuggled. In this way thousands of dollars have been smuggled through the bank every month. If this trafficking is stopped, the pressure on the reserve will decrease. Besides, other pressures can be easily dealt with. But it is not possible to deal with the pressure of trafficking.
According to the report, the dollar flow in the market has increased and the deficit in various sectors has also decreased as income exceeds expenditure. Trade deficit is decreasing by reducing imports and increasing exports. The trade deficit in 2022-23 was $2,738 million. In the last financial year, it has decreased to 2 thousand 243 million dollars. During the period under discussion, the deficit decreased to 495 million dollars. 18.08 percent as a percentage. This deficit can be further reduced in the future by increasing exports.
The current account deficit has narrowed recently due to increased supply of dollars. Especially, other foreign currency is now coming into the country along with previous due earnings. This has increased the supply of dollars in banks.
In the fiscal year 2022-23, the current account deficit in foreign currency was 1,163 million dollars. In the last financial year, it has decreased to 651 million dollars. Deficit reduced by 5.12 billion dollars. The percentage has decreased by 44.03 percent. The central bank expects that this deficit will decrease further in the future. Because now the foreign exchange income has started increasing. More dollars will be available from development partners in the future. Then this deficit will decrease further.
Total foreign exchange is calculated by adjusting the total foreign currency liabilities. In the fiscal year 2022-23, the deficit in the overall foreign exchange position was $8.22 billion. In the last financial year, it has decreased to 430 million dollars. The deficit decreased to $3.92 billion during the period under discussion. 47.69 percent as a percentage.
