BB injects $330m into market since IMF loan!

The Bangladesh Bank has injected $330 million into the country’s foreign exchange market since February 1 when the International Monetary Fund disbursed $476.27 million to Bangladesh as the first installment of a $4.7 billion loan.

The Bangladesh Bank has injected $330 million into the country’s foreign exchange market since February 1 when the International Monetary Fund disbursed $476.27 million to Bangladesh as the first installment of a $4.7 billion loan.

web-Bangladesh bank-bb

The Washington-based lender approved the loan in January under the extended credit facility (ECF) and the extended fund facility (EFF) to help the country defuse the ongoing volatility in its foreign exchange market.

Although the IMF has suggested Bangladesh reduce the frequent injection of US dollars into the market, the central bank has not followed the recommendation yet, said Ahsan H Mansur, executive director of the Policy Research Institute.

Between July 1 and February 9, the central bank supplied a record $9.44 billion to the market, according to data from the BB.

After the disbursement of the first tranche of the loan, the reserves stood at $32.69 billion on February 2, but the volume fell to around $32.6 billion yesterday owing to the continuous dollar injection into the market.

The reserve was $45.39 billion on February 9 last year.

The IMF support came as Bangladesh continues to face an exchange rate instability fuelled by a US dollar shortage caused by the fast depletion of the reserves amid escalated import payments against lower-than-expected export and remittance receipts.

According to an IMF document, rebuilding foreign exchange reserves remain a critical priority for Bangladesh in the short term.

Greater exchange rate flexibility, including attracting remittance inflows through formal channels, and scaling back non-monetary use of foreign exchange reserves, are expected to stabilise the reserves in the context of the ECF and the EFF programme, the IMF said.

“Foreign exchange interventions, which increased since the start of Russia’s war in Ukraine, should be limited to addressing disorderly market conditions.”

The government will have to start following IMF conditions from March this year.

As per the global lender’s quantitative performance criteria, foreign exchange reserves can’t be below $24.5 billion in June, $25.3 billion in September, and $26.8 billion in December.

Mansur explained that around $7 billion would have to be added to the reserves calculated by the IMF as the central bank considers the Export Development Fund and the funds under some other schemes while calculating its reserves.

This means the central bank will have to keep a reserve of at least $32 billion in June.

“So, the central bank should cautiously supply foreign currencies to the market. If the reserves slip below the level, the IMF may discontinue its programme and postpone its next disbursement,” Mansur said.

The IMF will disburse $4.7 billion in several installments over a 42-month period.

If the export earnings and remittance don’t increase to the expected level, the government will have to take more austerity measures, said Mansur, also a former high official of the IMF.

Although still in the positive territory, the current trends of export and remittance earnings, the two biggest sources of US dollars for the country, don’t promise that the receipts would go up in a massive way this year as the global economy continues to face challenges posed by the war-related disruptions.

Between July and January, exports grew 9.81 per cent year-on-year to $32.44 billion, according to data from the Export Promotion Bureau.

Expatriate Bangladeshis sent remittances amounting to $12.45 billion, in the first seven months of the current financial year, up 4.25 per cent from a year earlier.

Mansur says that the financial account of the balance of payments is now in the negative zone, so the central bank should take more policy measures, including the withdrawal of the ceiling of a 9 per cent interest rate on loans.

The deficit in the financial account stood at $1.09 billion in the first six months of 2022-23 in contrast to $6.89 billion during the same period a year ago, BB data showed.

Mustafizur Rahman, a distinguished fellow at the Centre for Policy Dialogue, thinks that it will not be possible to stop the erosion of reserves by only using the IMF’s funds given the volume of the debt servicing and import payments.

Imports fell 2.15 per cent year-on-year to $38.13 billion in July-December.

“Both the government and the central bank should start the reform programmes in the financial sector that have been suggested by the IMF and local economists,” Rahman said.

Local economists and analysts have recommended the government take more measures to tackle the hundi cartel, an illegal cross-border financial transaction, to increase the remittance inflow.

Their calls came as the flow of remittance is still lower than expected given that a record number of Bangladeshis went abroad in 2022 in search of jobs. More than 11.35 lakh Bangladeshis left the country for jobs abroad last year.

“On top of that, the central bank should ask businesses to repatriate export proceeds as early as possible,” Prof Rahman said.

Syed Mahbubur Rahman, managing director of Mutual Trust Bank, says that although the deficit in the current account has narrowed in recent times, the majority of banks is still facing a shortage of dollars.

“Some banks are unable to open letters of credit as per the requirement of clients.”

Source: The Daily Star


Japan wants to invest another fertiliser factory in Bangladesh

The Japan Bank for International Cooperation (JBIC) has expressed interest in setting up another fertiliser factory like Ghorashal Fertilizer Factory in Ashuganj, Bangladesh.

The JBIC has also shown interest in financing in different sectors including sugar, automobile and electronics.

The information came on Thursday while the meeting between Industries Minister Nurul Majid Mahmud Humayun and JBIC Governor Hayashi Nobumitsu at Industries Ministry in the city, reports BSS.

Humayun said Japan is helping Bangladesh in agriculture and industry in various ways.

“We are working together on setting up fertiliser plant. The development of the Japanese economic zone in Narayanganj is ongoing,” he added.

Source: The Financial Express


Policy making on offshore investment faces dilemma

Capital Account Transaction (Overseas Equity Investment) Rules 2022 have similar provisions.

A latest policy preparation facilitating Bangladeshis making offshore investment in foreign countries gets into a dilemma as some officials mentioned that an already-existing law on ‘Capital Account Transaction’ holds identical provisions.

Sources said different state agencies, including finance ministry and Bangladesh Bank (BB), were not in favour of making the new policy on this issue.

They believe that there is no need to prepare a separate policy on the matter under Bangladesh Investment Development Authority (BIDA) as there is a law styled ‘Capital Account Transaction (Overseas Equity Investment) Rules 2022’ in the country.

“The authority will send a summary paper to PMO (Prime Minister’s Office) to attach opinions…,” says one official, adding that the entire opinions will be put in the paper to consider whether the proposed policy can be prepared or not.

An inter-ministerial committee formed by the PMO has prepared the draft of the policy titled ‘Bangladeshis Foreign Investment Abroad 2021.’ The draft was already submitted to the PMO on September 29, 2021.

However, it finds similarity in the objectives and contents between the existing and proposed policies.

In this circumstance, the sources said, the PMO instructed the Financial Institutions Division and the central bank (Bangladesh Bank) to take next course of action.

In that context, the inter-ministerial committee was presented a comparative statement on the final draft of the ‘Capital Account Transaction (Overseas Equity Investment) Rules 2022’ and the ‘Bangladeshi Foreign Investment Policy 2021’ in its 6th meeting.

It also decided to send the draft Bangladeshis Foreign Investment Policy to all the member-agencies and trade bodies, including foreign affairs, and agriculture ministries, finance division, BB, the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) for eliciting their opinions.

Only eight agencies, including foreign, and agriculture ministries, FBCCI, Dhaka Chamber of Commerce & Industry (DCCI) and Bangladesh Securities and Exchange Commission (BSEC) suggested some amendments and additions to the policy.

On the other hand, three agencies-finance division, FID and BB-recommended that there is no need for a separate policy as already there is Foreign Equity Investment) Rules 2022. The dissent came at the 7th meeting of the committee.

“The members of the inter-ministerial committee framed the draft policy through stakeholder consultations and workshops in different levels for around three years,” reads the meeting minutes.

Contacted, a senior official said, “We will send the draft policy to the PMO for taking next decision. All members of the high-powered committee have given same opinions on PMO decision about the policy.”

He said it’s for the BIDA to take decision on the policy according to the PMO instructions.

According to the existing Capital Account Transaction (Overseas Equity Investment) Rules, Bangladeshi exporters can make overseas equity investment subject to sufficient balance in their export-retention quota (ERQ).

In this past January, the Financial Institutions Division issued the Capital Account Transaction (Equity Investment Abroad) Rules 2022 under Section 26 of the Foreign Exchange Regulation Act 1947.

In this context, some conditions and provisions have been laid down in the existing rules. The applicant will be able to invest 20 per cent of the average annual export earnings of the organization for five years or less than 25 per cent of the net assets shown in the latest audited annual financial report as equity abroad under rules.

Source: The Financial Express


Runner launches locally-made three-wheeler

Runner Automobiles yesterday launched the country’s first “Made in Bangladesh” autorickshaws for the local and foreign markets.

Runner opens three-wheeler manufacturing plant

Runner Automobiles yesterday launched the country’s first “Made in Bangladesh” autorickshaws for the local and foreign markets.

At least 70 per cent of the vehicle except for some components of the engine have been made locally through technical collaborations with Indian automaker Bajaj Auto, said Hafizur Rahman Khan, chairman of Runner Group.

Around 30,000 autorickshaws run by liquefied petroleum gas and compressed natural gas will be produced a year at Runner Automobiles’ three-wheeler plant in Mymensingh’s Bhaluka, he said at the launch.

Some 300 local and 400 foreign workers have already been employed for the 10-acre Runner factory established at a cost of about Tk 300 crore, Khan said.

“A few local organisations have also cooperated with us. This vehicle will help in transportation of the common mass along with creating more jobs.”

“Through this, a domestic company for the first time brought a three-wheeler autorickshaw to the market after manufacturing it in the country,” said Salman F Rahman, prime minister’s adviser on private industries and investment, after inaugurating the plant.

Although the autorickshaws have been produced in the country, Bangladesh still has to import 20-30 per cent of the parts to make the three-wheeler, Rahman said.

“We want to be fully capable of manufacturing three-wheelers. Runner will fulfil this gap in future.”

He said the government will extend all-out support for the expansion of the export-oriented automobile industry.

Domestic companies should adopt modern technologies to increase production and remain competitive, he said.

“Runner is the first manufacturer and exporter of motorcycles in Bangladesh,” said Subir Kumar Chowdhury, managing director and CEO of Runner Automobiles.

“With the autorickshaw, we entered into the three-wheeler industry today. We hope we will be successful in this industry like motorcycles.”

“This is not only the first three-wheeler factory in Bangladesh, but also the first Bajaj three-wheeler factory outside of India,” said KS Grihapati, president of Bajaj Auto.

“We are excited to work with Runner. The organisation has already proved their capabilities.”

He said Bajaj will contribute to the development of automobile industry in Bangladesh.

There are about five lakh three-wheelers in the country, but only one lakh are registered, said Abdul Matlub Ahmad, president of Bangladesh Automobiles Assemblers and Manufacturers Association and chairman of Nitol-Niloy Group.

“It becomes difficult to hold these vehicles accountable in case of an accident.”

The government should take strong measures to ensure registration of all three-wheelers in the country, he said.

Source: The Daily Star


Garments industry slowdown is key 2023 risk for Bangladesh

This year’s expected global slowdown could hit Bangladesh’s key garment industry hard. We see the sector’s exports growth falling by roughly 3 percentage points in 2023 as world demand for clothing slows. 


This will add pressure on already-dwindling foreign exchange reserves and weigh on GDP. The damage could also be worse if persistent power outages at the country’s factories cause overseas buyers to shift orders elsewhere.

  • Growth in Bangladesh’s garments exports falls by 4 percentage points for every 1 ppt that global growth slows, according to our calculations.
  • In 2023, this should mean growth in apparel shipments decelerates to 24.4% from 27.6% a year earlier. The slowdown implies $1.5 billion less revenue than if shipments maintained last year’s pace.
  • The garment industry is key to the overall economy. It accounted for about 9.3% of GDP in the fiscal year through June 2022. The sector also made up 82% of total exports last calendar year, earning $45.7 billion, an amount exceeding the country’s FX reserves of $34 billion at the end of 2022.
  • The slowdown in clothing shipments will be the largest drag on the expansion in 2023, shaving an estimated 0.8 ppt from GDP growth. Overall growth will likely fall to 6.1% from 6.9% in 2022.
  • The damage could also be worse. Competitors like Vietnam could take market share. There is a heightened risk that overseas retailers will cancel existing orders with Bangladesh’s firms given power outages that have plagued the industry due to fuel shortages.
  • Our analysis only quantifies the impact of the expected slowdown in global growth (which Bloomberg Economics estimates falling to 2.4% in 2023 from 3.2% in 2022) and doesn’t account for these other risks.

Ankur Shukla is Indian Economist for Bloomberg Economics in Mumbai.

Source: TBS News

Chittagong Customs office.

Growth in CTG Customs revenue is declining as a result of reduced imports

Chattogram Custom House, the largest customs station in the country, witnessed a decline in revenue growth in the first seven months of the current fiscal year 2022-23, due to fall in imports amid the ongoing dollar crisis and global slowdown due to the Russia-Ukraine war.   

The customs station reported negative growth in December and January following zero growth in the sixth and seventh months.

According to data from the customs house, the revenue growth was 40.87% in July of FY 2022-23, which declined to 24.67% in August and -0.17% in September. Afterwards, the growth increased to 3.91% in October and 14.13% in November.

The growth in revenue collection again dropped in the next two months. The growth was -9.18% in December and -4.38% in January.

Chittagong Customs office.
CTG Customs


The customs station posted 8.28% overall growth in the July-January period of the FY 2022-23, which was 25.26% during the same period of the FY 2021-22—a decrease by 17% in the seven months.

In January of FY 2022-23, the customs house collected Tk4,744.61 crore as revenue, less by 28.67% than the target of Tk6,652 crore. In December, the revenue collection was Tk4,388.05 crore against the target of Tk6,604 crore.

The target of revenue collection was set at Tk74,206 crore in the fiscal year 2022-23. Tk34,915.74 crore was collected during the July-January period against the target of Tk43,212 crore in the seven months. The earnings were recorded at Tk32,246.53 crore during the same period in FY 2021-22.

In the first seven months of the FY 2022-23, revenue collection was less by Tk8,296.26 crore or 19.20% than the target.

In the FY 2021-22, the Chattogram Customs House collected Tk59,159.83 crore against the target of Tk64,159.83 crore, posting a growth of 14.70%.

“The revenue collection in the current fiscal year has decreased compared to the previous year. Imports of low-duty products, especially food items and capital machinery have increased. But revenue collection has decreased due to decrease in imports of luxury goods including cars, cosmetics, electronics, which are high revenue collection,” Md Bodruzzaman Munshi, deputy commissioner of Chattogram Customs House, told The Business Standard.

“Earlier, the price of the dollar was Tk84, which has now crossed Tk100. As a result, the traders have to pay extra in both the price of the imported goods and the duty. On the other hand, customs revenue has also decreased. I do not see any solution to this crisis until the war situation becomes normal,” Chattogram Chamber of Commerce and Industry President Mahbubul Alam told TBS.

Chattogram Customs House collects duty on goods imported through Chattogram Port, which oversees 92% of the country’s import and export trade.

Apart from the country’s main seaport, the customs house also collects duty on goods coming through Shah Amanat International Airport in the port city.

Source: TBS News


$1.42b export proceeds overdue amid cry for dollar

While importers, businesses, industries, and workers look at a bleak future as raw materials imports and industrial production get cut due to the current dollar crisis, more than $1.42 billion remains unrepatriated as of December last year despite the expiration of the stipulated 120-day time frame.

There is an obligation to repatriate the money within a maximum of 120 days from the day after sending the export documents to the importer’s bank concerned following shipments of goods.

The Bangladesh Bank on 29 January issued a directive to the banks for repatriating the overdue proceeds as soon as possible, revealing the urgency of the situation and the importance of recovering the much-needed foreign currency to shore up the country’s economy.

In addition, the banks were also instructed to take immediate steps for quick repatriation of any non-overdue export proceeds, which stood at around $2.3 billion till December last.

The central bank also asked banks to provide detailed information about the overdue amount by 12 February.

When export proceeds remain overdue, it means that the payment for goods or services that have been exported to another country has not been received within the agreed-upon time frame.


Infographic: TBS

This can cause financial difficulties for the exporter, as they are counting on the revenue from the export to keep their business running. Overdue export proceeds can also harm the exporter’s reputation and their ability to secure future business deals.

According to central bank data, of the $1.42 billion overdue till 31 December 2022, around $276 million remain outstanding on charges of short shipment (deficiency in exported goods), $75 million remain unpaid due to bankruptcy, $252 million remains stuck due to legal complications, $122 million is stuck for miscellaneous reasons and $700 million remain unpaid due to unspecified reasons.

The central bank revealed this in a report to the Finance Division under the Ministry of Finance about the current situation of foreign exchange supply.

After taking over as governor of Bangladesh Bank, Bangladesh Bank Governor Abdul Rouf Talukder issued a directive to banks during a meeting in July last year, asking them to realise overdue export proceeds to expedite the foreign exchange inflow.

The central bank governor also gave similar instructions during a meeting with banks’ chairmen at the end of January.

The central bank data showed that at the end of June last year, the overdue export proceeds stood at $1.28 billion, meaning more than $140 million of export proceeds became overdue in six months.

A number of Bangladesh Bank officials, seeking anonymity, told The Business Standard (TBS) that exporters are intentionally delaying repatriating the proceeds to get higher exchange rates.

The central bank observed that most of the exporters are repatriating the proceeds at the very end of the stipulated 120 days.

When asked about the allegation, Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) Executive President Mohammad Hatem told TBS, “This allegation is baseless and fabricated. Every businessman is short of money. No one in their right mind would leave money abroad to get a slightly higher exchange rate.”

More than 80% of Bangladesh’s export earnings come from the ready-made garments sector and exports of knitwear are higher among readymade garments.

Mohammad Hatem said, “Traders have no scope to delay the repatriation of export proceeds. They are making every effort to bring money to the country as soon as possible.”

What actually happened is that foreign buyers are unable to pay their import bills on time due to the global economic crisis, the BKMEA president said, adding that bills – which were supposed to be paid at the time of issuance of export documents – are delayed by three to four months or more.

“The delay is occurring due mainly to foreign importers, not local exporters. Some foreign buyers are paying late on purpose, an attitude particularly common among buyers in the US and India,” Mohammad Hatem added.

It is a punishable offence if the export proceeds are not repatriated within the stipulated time. Exporters will be denied various benefits such as financing from the Export Development Fund (EDF), cash incentives and the LC margin facility.

Bangladesh Bank Executive Director and Spokesperson Md Mezbaul Haque told TBS, “Exporters can take additional time by applying to Bangladesh Bank if there is a logical reason but there is no scope for not bringing the proceeds to the country on time without genuine reasons.”

“Banks provide funds to exporters against back-to-back letters of credit (LCs) so that they can buy raw materials for making the export products. Foreign currency goes into these funds. So, it is important that the foreign currency returns to the country on time through proceeds. Otherwise, there is an imbalance in the inflow and outflow of foreign exchange,” the central bank spokesperson said.

The Bangladesh Bank wants the proceeds of goods exported against Sight LC – a document that verifies the payment of goods or services, payable once it is presented along with the necessary documents – to come home immediately after the submission of documents to the importer’s bank, he said.

This payment is necessary because Bangladesh has always been a trade deficit country. Part of the deficit is met through foreign exchange coming from remittance, foreign loans and aid, and foreign direct investment, said Mezbaul Haque.

For the past few months, there has been volatility in the exchange rate of foreign currency in the country. Taka has depreciated more than 20% against the US dollar in the last six months. Many banks are unable to open LCs due to the dollar crisis.

To keep the dollar supply easy, the Bangladesh Bank has sold more than $9 billion to banks from foreign exchange reserves so far in the current fiscal year 2022-23. The dollar shortage, however, continues.

Bangladesh Foreign Exchange Dealers Association (Bafeda) has changed the foreign currency exchange rate several times since last September. Banks are currently offering Tk103 per dollar to exporters as per the decision of the Bafeda.

Besides, Bafeda has decided to pay an additional Tk0.5 per dollar to the exporters who will bring back the proceeds (against goods exported last November and December) by 15 February.

The central bank officials alleged that some businessmen are bringing export proceeds to the country at their convenience to take advantage of the situation. Exporters are bringing the proceeds to the country when they have to meet their own import liabilities since banks are reluctant to open new LCs.

When asked about this, Selim RF Hussain, president of the Association of Bankers Bangladesh (ABB) and the managing director and CEO of Brac Bank, told TBS that there is usually an agreement between exporters and importers on when the price of the goods will be paid.

“Export proceeds cannot be brought at will but there are opportunities in some cases. It is possible for some of the big exporters. Therefore, it has been decided to give incentives on the exchange rate so that they do so,” he added.

“The $1.42 billion export proceeds remain overdue for a long time and have accrued since 2012. Around $376 billion worth of products and services were exported from the country during this period. So, the overdue amount is small compared to total exports. Still, efforts are being made to ensure that no money gets stuck abroad,” said Bangladesh Bank Executive Director and Spokesperson Md Mezbaul Haque.

Source: TBS News