Remittance, export to go up slightly in Q2

Bangladesh's export and remittance receipts and import payments may increase slightly in the second quarter of the current fiscal year, according to a projection of the Metropolitan Chamber of Commerce and Industry, Dhaka (MCCI). 

The country's oldest chamber made the projection in its review of the economic situation for the July-September quarter.

Although the increase in exports and remittances would be a positive development for the country, the slight rise in import bills would not bode well for the economy.

The MCCI said the economy is gradually trying to overcome the difficulty caused by the Covid-19 pandemic and the war between Russia and Ukraine. Therefore, the performances of the selected economic indicators are mixed.

The foreign exchange reserves are likely to fall in November due to the payment to the Asian Clearing Union against imports.

On November 7, reserves slipped to around $34.5 billion after the central bank cleared $1.3 billion worth of import bills.

The foreign exchange reserves are likely to fall in November due to the payment to the Asian Clearing Union against imports, the MCCI said

The decline in reserves is adding to financial strains the country is already facing for a record current account deficit amid a sharp depreciation of the local currency against the US dollar, said the MCCI.

The reserves may improve to $35.99 billion at the end of December, it projected.

In another encouraging sign, inflation could go down slightly in the second quarter of the current fiscal year and may stand at 8.95 per cent in November and fall further to 8.80 per cent in December.

According to the Bangladesh Bureau of Statistics, inflation was 8.91 per cent in October.

The tapering of the global pandemic and the Russia-Ukraine war on its close heels were the strongest drivers behind the price rises across the world and in Bangladesh.

Alleged price-fixing in the domestic market made the situation far worse, said the MCCI.

Overall exports declined 7.85 per cent year-on-year to $4.35 billion in October. But the chamber projected it might go up to $4.43 billion in December.

Similarly, money sent home by Bangladeshi workers living abroad may increase to $1.59 billion in December.

Despite a surge in the outflow of workers, remittances to Bangladesh declined 7.4 per cent year-on-year to $1.52 billion in October.

In an unpromising development, imports are expected to maintain its current trend.

According to the Bangladesh Bank data, the total value of custom-based imports during July-September increased by 11.69 per cent to $20.91 billion for the higher purchase of fuel oils to meet a growing domestic demand amid expanding activity.

It stood at $7.19 billion in September and could accelerate to $7.26 billion at the end of the second quarter.

The MCCI also talked about the pressure facing the economy.

Bangladesh's macro-economy is now under pressure due to the higher rate of the US dollar, import payments, negative current account balance, weak remittance inflow, and reduced foreign exchange reserves.

"The government needs to take some measures to stable foreign exchange reserves, manage inflation, enhance revenue generation, ensure electricity and gas supply for economic activities, and extend social safety net programme in order to overcome the pressure facing the economy."

It said public food stock is a vital factor for food price stabilisation as well as the public food distribution system.

In order to maintain a healthy stock and stabilise prices, the government is procuring food grains from both internal and external sources.

At present, the public stock is prevailing at a satisfactory level and it may reach a better position after the completion of the ongoing internal procurement of boro rice and external procurement of rice and wheat, said the MCCI.

The review said the net foreign direct investment in the first three months of the current fiscal year rose 21.87 per cent to $457 million.

However, FDI inflow to Bangladesh is low compared to that in many countries at a similar level of development.

Bangladesh's low labour costs are generally believed to be attractive to foreign investors. Yet, they hesitate to make fresh investments in the country because of the underdeveloped infrastructure, shortage of energy, weak transmission infrastructure, lack of consistency in policy and regulatory frameworks, scarcity of industrial land, corruption, and non-transparent and uneven application of rules, said the MCCI.  

"The government needs to address these impediments to attract more FDI to the country in order to ensure the country's economic recovery from the coronavirus pandemic."