Fear of declining employment
Zarif Mahmud: Even if the imports are reduced, the dollar crisis is not going away. Entrepreneurs are not able to open LC due to lack of demand dollars. As a result, the desired investment and employment are not happening. Again, various regulatory measures of Bangladesh Bank are continuing. All in all, the trend of decreasing product imports continues this year as well. Imports fell by around 16 percent last fiscal. In July, the first month of the current fiscal year, the opening of import LCs fell by 31 percent. And LC settlement has fallen by more than 20 percent.
It is known that Bangladesh Bank started import control from July last year to prevent dollar crisis. LC Margins up to 100% on some products and verification of each LC. Again, the duty is increased on the import of some products. As a result, LC opening and settlement continued to decline since July last year. Those concerned said that further decrease in opening of LCs means increasing stagnation in the economy. Besides the dollar and money crisis, many people are not interested in new investments now that it is an election year. There is already high inflation. If employment-generating investment does not come, the economy will stagnate further in the future.
According to the report of Bangladesh Bank, in July of the current financial year, LCs worth only $437 million were opened for the import of various products. The settlement is 598 million dollars. In the same month of the previous year where LCs of $ 635 crore were opened and LCs of $749 crore were settled.
Bangladesh Bank’s report also shows that LC opening has decreased more in the first month of the current financial year for petroleum products. Only $480 million of LCs were opened in July. In the same month of the previous financial year, it was $1100 million. LC is the second raw material used in industry in terms of open reduction. LCs for these products fell by over 36 percent to $1.35 billion. Apart from this, the LC of primary goods used in industry decreased by about 31 percent to $320 million, the LC of capital equipment decreased by 22 percent to $180 million and the LC of consumer goods decreased by 21 percent to $470 million. Other product LCs opened down 18 percent to $1.49 billion.
Meanwhile, last June, Bangladesh Bank Governor Abdur Rauf Talukder told the media that from the fiscal year 2023-24, dollars will not be sold to any bank at cheap or normal rates. But Bangladesh Bank has sold about $2 billion till August 23.
According to Bangladesh Bank, Bangladesh Bank is selling dollars from reserves to commercial banks to keep the import of energy and daily commodities normal. This increases the pressure on the reserves. Reserves fell to $29.33 billion from $39 billion at the same time last year due to continued dollar sales from reserves. During the 23 days of July and August of the current financial year 2023-24 (1.96 billion), $196.3 crore were sold. During the same period last year, the amount of dollar sales was only $177 million. And in the outgoing 2022-23 financial year, Bangladesh Bank sold $13.58 billion from the reserve.
Policy Research Institute (PRI) executive director Ahsan H. Mansoor said that the central bank has sold dollars at the rate of Tk 109.50 to some banks including Sonali to pay the import bills of daily commodities including energy. This rate is cheaper than the market. Tk 114 per dollar is being sold in the market. Dollars will be traded in illegal channels. For this reason, despite the increase in export and expatriate income, the dollar crisis is not going away immediately. It is necessary to consider whether these dollars are smuggled or not.
According to the data of Bangladesh Bank, $114.70 crore were sold from the reserve in July of the current financial year. And in the first 23 days of August this month, $81.6 million were sold. Earlier, the maximum $13.58 billion was sold from Bangladesh Bank Reserve in the outgoing 2022-23 financial year. Earlier in 2021-22 fiscal year it was sold at $7.62 billion.
On the other hand, according to the IMF last Wednesday, the real reserves stood at $23.16 billion. But according to Bangladesh Bank itself, the reserves are $29.32 billion. Earlier in August 2021, the reserve crossed the record $48 billion milestone. The following year, on August 16, 2022, the reserves stood at $39.55 billion. At present, it has come down to around $29 billion.
Executive Director and Spokesperson of Bangladesh Bank Majbaul Haque said, “Dollars are being sold to meet the import costs of daily commodities including fuel, which is done in the interest of the country. And because the dollar is enough, it is being sold. Reserves are also in a good position. It is possible to cover more than 5 months of import expenses with the current dollar amount. According to international standards, meeting 3 months of imports with the reserve currency of a country is considered standard.
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