Economy
Export Sector Faces Uncertainty as Incentives Diminish and Dollar Rates Soar
Following the opening of letters of credit (LC), importers in Bangladesh are allegedly facing an additional charge of Tk12 per dollar when exchanging dollars to taka in commercial banks to release their imported items. Business leaders raised these concerns during a meeting of the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) in the capital, Motijheel, with Chamber President Mahbubul Alam in attendance.
Mehdi Ali, chairman of the FBCCI standing committee on export, stated that even if an LC is opened at Tk110 (dollar rate) for the import of raw materials or machinery, the commercial banks change the conversion rate to Tk120-122 per dollar when releasing the goods from the ports. Some banks allegedly even charge extra money during the LC opening process. The significant gap of more than Tk10 per dollar is affecting the competitiveness of traders in the export market, leading to increased prices of products in the local market.
During the meeting, business leaders also expressed concerns about potential losses in the export sector if incentive facilities for export-oriented industries, such as the readymade garment industry, are discontinued. The recent reduction of cash incentives for exports by Bangladesh Bank has already raised apprehensions among entrepreneurs in the export sector.
Leaders of the garment and textile sector reportedly met with Finance Minister Abul Hassan Mahmood Ali to express their concerns over the issue.
In another meeting of the FBCCI standing committee on ports and shipping, speakers called for the reduction of complexity in the import-export process for goods and raw materials. They highlighted that the ongoing global crisis has significantly increased business operating costs in the country, causing local entrepreneurs to lag behind in international market competition. FBCCI President Mahbubul Alam emphasized the importance of quickly addressing the existing problems in the import-export process and suggested that the standing committee on exports could play a crucial role in dealing with the current dollar crisis.
During the eleventh month of the current fiscal year, the country’s foreign currency reserves have fallen below $19 billion for the first time. After paying off some import bills, the reserves have now stood at $18.26 billion on Sunday.
According to the International Monetary Fund (IMF), as of May 8, the total foreign currency reserves of the country were $19.82 billion.
Mohammad Mezbauul Haque, the spokesperson of Bangladesh Bank, informed that through the Asian Clearing Union (ACU), the central bank has paid off import bills totaling $1.63 billion over the past two months.
However, Bangladesh Bank maintains that after paying off the import bills, the foreign currency reserves now stand at $23.71 billion.
According to the Central Bank’s accounts, the reserves were $25.27 billion on May 8.
The Dhaka Stock Exchange (DSE) and the DSE Brokers Association (DBA) have expressed gratitude towards Prime Minister Sheikh Hasina for her directive to list government companies in the capital market, a move hailed as timely and positive.
The directive was issued during the recent meeting of the Executive Committee of the National Economic Council (Ecnec) last Thursday.
Dr. Hafiz Muhammad Hasan Babu, Chairman of DSE, described the directive as a significant step towards enhancing the dynamics of the capital market. He emphasized that besides invigorating the capital market, this move would also attract foreign investment and promote sustainable development.
Despite previous efforts, government institutions had not been listed in the stock exchange, according to a notification issued by the DSE. The Prime Minister’s directive is seen as a pivotal step towards revitalizing and expanding the economy.
Dr. Babu further remarked, “The listing of reputable companies in the capital market, as directed by the Prime Minister, will greatly benefit the country’s economy. It will also enhance investor confidence.”
Similarly, the DBA released a notification applauding the Prime Minister’s directive, terming it as positive and timely for the capital market.
Saiful Islam, President of DBA, expressed optimism about the directive’s potential to accelerate the country’s capital market and overall economy. He pledged support to relevant government departments and regulatory bodies in implementing the directive, ensuring its positive impact on the economy, including the capital market.
India has expressed interest in financing Bangladesh’s Teesta project, announced Foreign Minister Hasan Mahmud. Speaking to reporters after a meeting with Indian Foreign Secretary Vinay Mohan Kwatra, Mahmud stressed the importance of aligning the project with Bangladesh’s needs. He confirmed discussions on the Teesta issue during the meeting. Mahmud also affirmed Prime Minister Sheikh Hasina’s upcoming visit to New Delhi, indicating that the finalization of the date would depend on the formation of the new Indian government following ongoing elections.
Meanwhile, the IMF has approved a $1.15 billion staff-level loan for Bangladesh in its third tranche. Mahmud noted the ongoing elections in India and the subsequent formation of the new government as factors influencing the scheduling of PM Hasina’s visit.
When asked about the sequence of visits to India and China, Mahmud suggested Delhi’s geographical proximity to Bangladesh. Diplomatic sources suggest PM Hasina’s visit to India is planned for early July, following India’s elections.
Pre-election surveys indicate strong prospects for Indian Prime Minister Narendra Modi’s re-election. Modi previously congratulated PM Hasina on her electoral victory in January, expressing optimism about strengthening ties between the two nations.
The last bilateral engagement between the prime ministers occurred during the G-20 Leaders Summit in September 2023. Modi is expected to invite South Asian and BIMSTEC leaders to his swearing-in ceremony, fostering regional cooperation.
Addressing border killings, Mahmud emphasized the government’s commitment to ending such incidents and promoting the use of non-lethal weapons by border forces. Discussions also covered enhancing physical and people-to-people connectivity, including cooperation with India to import hydropower from Nepal and Bhutan through India. Mahmud highlighted the need to further ease visa restrictions to strengthen people-to-people relations.
