Economy
Why $12.2b export proceeds pending abroad in 9 months of FY24?
When the country is in dire need of dollars amid a fast erosion of its foreign exchange reserves, $12.2 billion of its total export proceeds remained pending abroad in the first nine months of the fiscal 2023-24 – taking the gap between export receipts and shipment value to a historic high.
Bangladesh Bank data shows that export shipment value, as reported by the Export Promotion Bureau (EPB), was $40.8 billion in July-March of FY24. However, export receipts through the banking channel were $28.6 billion. The gap of $12.2 billion was reflected in trade credit, a component of the financial account of the country’s balance of payment statement.
The widening gap between export realisations and shipment value has put pressure on the country’s financial account, as it is reflected in trade credit. The deficit in the financial account reached a record high of $9.2 billion in July-March, compared to $2.9 billion in the same period of the previous fiscal year, according to central bank data.
Earlier in the FY23, export receipts fell short of the value of shipments by $12 billion, a historic high, raising concerns among the Bangladesh Bank. However, this figure may be even higher by the end of FY24 if the current trend continues.
When contacted, a senior executive of the Bangladesh Bank, involved in preparing the balance of payment statement, explained the rising trade gap, saying that they found a significant mismatch between the EPB-reported export data and the realisation of export proceeds.
The central bank is now working to find out whether export proceeds are not coming home or if there is a problem with the shipment value reported by the EPB, he said.
He added that if any mismatch is identified in accounting between the shipment and realisation values of exports, it will ease the pressure on the financial account.
When asked for an official comment on this matter, Bangladesh Bank Spokesperson Md Mezbaul Haque did not respond.
At present, trade credit reflects the highest negative value among all components of the financial account statement. Trade credit became negative $12.24 billion from July-March of FY24, compared to only $3.96 billion in the corresponding period of the previous year.
Central bank data shows that trade credit has turned significantly negative from positive since last fiscal year, with a widening gap between export shipment and realised value.
In the FY22, trade credit was a positive $311 million, and the financial account had a surplus of $16.6 billion.
Though the unrealised export value is rising, bankers have been experiencing a general trend in export repatriation.
When speaking to the news reporter, a senior executive of a private commercial bank said that the export repatriation trend is normal in his bank. He emphasised, “If exporters do not repatriate their proceeds, how will they run their factories?”
While common factors such as time lag and export bill discounts can account for mismatches between shipment and realised values, a senior executive at the Bangladesh Bank noted that the recent trend of unrealised export proceeds is unusually high.
The mismatch between export shipment and realised value has been notably pronounced over the last two years since FY22, following Bangladesh Bank’s decision to devalue the taka amidst a rising dollar crisis.
In the FY22, unrealised export proceeds reached $8.4 billion, with export receipts lagging 16% behind the shipment value of $52 billion, as disclosed by Bangladesh Bank data in the publication titled “Export Receipts of Goods and Services.”
Central bank data demonstrated that unrealised export proceeds ranged from 10% to 12% of the export shipment value between FY07 and FY21, with figures varying from $1 billion to $5 billion.
Responding to queries regarding the escalating value of unrealised exports during a monetary policy announcement event in June last year, Bangladesh Bank Governor Abdur Rouf Talukder explained that some exporters were deliberately delaying the repatriation of export proceeds to capitalise on currency devaluation.
He mentioned that exporters were permitted to retain export proceeds in their Export Retention Quota (ERQ) account, with a six-month time lag existing between shipment and receipt.
However, he expressed optimism that the Bangladesh Bank’s issuance of a circular to deter gains from devaluation would contribute to reducing the unrealised export value.
Earlier in March last year, the central bank issued a circular stating that exporters would be paid based on the dollar rate on the 120th day of export shipment, even if the proceeds came later. However, this circular seems to have had no impact on export repatriation.
Later, in another circular issued on 20 May, the Bangladesh Bank revised that policy, allowing exporters to receive the dollar rate on the day of encashing export proceeds. As a result, exporters will have an opportunity to receive the current dollar rate even if they encash the export proceeds after the 120th day.
Expatriate Bangladeshis sent approximately US$ 2.11 billion in remittances during the first 28 days of September in the fiscal year 2024-25, according to data released by Bangladesh Bank on 29 September.
Of this total, state-owned and specialised banks handled $679.10 million, while private banks received $1.43 billion in remittances.
Chief Adviser to Bangladesh’s interim government, Professor Muhammad Yunus, has vowed to expedite reforms and hold elections swiftly. Yunus, who recently assumed the role after the collapse of Prime Minister Sheikh Hasina’s 15-year administration, expressed his commitment during an interview with Tokyo-based news outlet NHK WORLD in New York on Sunday. He was attending the United Nations General Assembly at the time.
Following mass student-led protests that ended Hasina’s long-standing rule in August, Yunus stepped in as the leader of the caretaker government. Known for founding Grameen Bank, an institution providing microloans to the underprivileged, Yunus, along with the bank, earned the Nobel Peace Prize in 2006 for his efforts in poverty alleviation.
During the interview, Yunus emphasized that the interim government’s primary mission is to implement reforms promptly and ensure elections are held as soon as the groundwork is complete. He underscored the importance of success, stating, “Failure is not something that we can accept.”
Addressing the pivotal role of students in the ousting of the Hasina administration, Yunus acknowledged the sacrifices made by young people, referring to their involvement as part of a “revolution.” He highlighted his intention to engage the younger generation in shaping policy.
Furthermore, Yunus called for continued support from Japan, Bangladesh’s largest donor, during this crucial transition period. He stressed that Japan’s assistance is vital to stabilizing Bangladesh’s economy and fostering a democratic foundation in the nation.
Syeda Rizwana Hasan, the Adviser for Environment, Forests, and Climate Change, announced today that steps will be taken to restrict the use of polythene shopping bags to safeguard future generations.
Starting from October 1, polythene bags will be banned in shopping malls, followed by a ban in kitchen markets from November 1.
“Everyone must take responsibility and stop using polythene voluntarily. Action against polythene producers will begin from November 1,” Rizwana Hasan stated during a seminar.
The Department of Environment (DoE) organized the seminar to raise public awareness about alternatives to banned polythene bags.
Rizwana Hasan highlighted that the restriction on polythene will be executed in phases according to legal provisions, and discussions with shopping centers and store owners are ongoing to ensure a smooth transition.
She also announced plans to make the government secretariat a plastic-free zone by December.
Other speakers at the seminar included Environment Secretary Dr. Farhina Ahmed, DoE Director General Dr. Abdul Hamid, Director Rajinara Begum, President of the Shop Owners Association Muhammad Helal Uddin, and Md. Arifur Rahman Bhuiyan, Assistant Professor of Environmental Science at BUP. They discussed the harmful effects of polythene and the need for alternative products.
Earlier, Rizwana Hasan inaugurated a fair showcasing eco-friendly alternatives to polythene bags and visited 24 stalls. The fair featured products from government and private entrepreneurs, including reusable bags, jute bags, paper bags, and items made from bamboo and cane.
