For the first time, Bangladesh's export earnings crossed $52 billion in the just-concluded fiscal 2021-22, but it seems far from holding the trade deficit from widening further as the volatile global commodity market continues to inflate import bills.
A 15% drop in inward remittance year-on-year put overall balance of payment and the central bank's foreign reserve holdings in further stress.
Though the Export Promotion Bureau (EPB) has released export data for June giving the full year's picture, the Bangladesh Bank did not yet release import figures even for May.
However, unofficial figures collected from the central bank show import expenditures of 11 months (July-May) of the just-ended fiscal year would reach $81.49 billion, exceeding exports by $34.32 billion.
The deficit amount crossed the Bangladesh Bank's projection of $33 billion for the just-concluded fiscal year.
Widening trade deficit further intensified pressure on foreign exchange market and worsened the current account balance position, aggravating the dollar crisis in the local market.
The foreign exchange reserves remained below $42 billion, with dollar trading for Tk93.45 among banks and Tk97 or more in the kerb market.
The current account deficit stood at $17.23 billion in July-May of Fiscal Year (FY) 22, 12% higher from July-April of the same year, according to the Bangladesh Bank data.
Exports break record
Though record shipments of apparel propelled the annual exports to all-time high of $52.08 billion, other emerging sectors such as home textiles, leather and leather goods, agricultural products and traditional jute and jute goods also performed better in the export outlook.
This year's export earnings target from goods shipment was $43.5 billion, which was reached by 10 months. End of the fiscal, additional $8.58$ billion was earned, according to the provisional data of the Export Promotion Bureau (EPB) released on Sunday.
Bangladesh's export earnings have almost reached its export target amounting to $43.5 billion set for FY22 in 10 months.
However, once again the golden fibre jute and jute goods lost their glory as the sector recorded a 2.91% negative growth to $1.12 billion which was $1.16 billion in FY 21.
AHM Ahsan, vice-chairman of the EPB, told The Business Standard that if they take $8 billion worth of services exports into account, exports will reach $60 billion at the end of this fiscal year.
He also mentioned that exports will continue to grow until next October.
In June, exports clocked the $4.90 billion mark for the highest in a single month in the last fiscal year, and June growth is over 37% year-on-year.
In July-June, the country's apparel shipment alone accounts for more than 81% worth $43.34 billion, of which knitwear and woven apparel export reached $23.21billion and $19.19 billion respectively, according to sources at the Export Promotion Bureau (EPB).
According to the EPB data, the home textile sector earned $1.62 billion, leather and leather goods earned $1.24 billion in the outgoing fiscal, while agricultural products, jute and jute goods recorded $1.16 billion and $1.12 billion shipment in FY 22.
Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) Vice President Fazlee Shamim Ehsan said apparel shipment was doing good due for three reasons: raw materials price hike reflected on the price, more orders came to Bangladesh thanks to Covid management and global geo-politics had created more scope for Bangladesh.
He further explained that a number of countries, including the USA, are looking for another reliable sourcing destination beside China.
Fazlee Shamim Ehsan also expressed worries over the global economy facing record high inflation that was reflected on apparel orders for upcoming months.
"My factory is facing 16% lower orders for the coming months," he said, adding that there was a fear of recession, which affected global apparel demand.
He also hoped for recovering this push as they have experience to overcome such uncertainty.
Bangladesh Garment Manufacturers and Exporters Association (BGMEA) President Faruque Hassan told TBS that apparel exports saw a good growth even during the war, as huge orders were booked with the trend expected to continue in the next two months.
He, however, said next year would be tough due to global inflation and recession as some buyers with good inventory would be careful in placing new orders.
The BGMEA president also hoped that such positive growth would be maintained next year.
"Definitely the industry will try to maintain a double-digit growth," he added.
Trade deficit hits record too
Trade deficit was at its historic high of $27.56 billion in 10 months, which shot up by $6.76 billion in 11 months till May, with clear signs of growing bigger when full-year data will be available given the current global market trend.
The current account deficit is already higher than $16.54 billion that the central bank projected for the next fiscal year in the new monetary policy.
Bangladesh Bank governor Fazle Kabir at the monetary policy announcement said keeping exchange rate stable will be the main challenge for the central bank in the current fiscal year.
He said that Bangladesh Bank will take all kinds of measures to stop luxury item imports to save foreign currency.
Saleh Uddin Ahmed, former governor of Bangladesh Bank, said, "We are already under pressure due to the trade deficit. Reserves have been reduced. In the outgoing fiscal, exports increased slightly compared to the previous year but non-essential imports were very high. We need to look at whether there is a fair export income to reduce these problems."
He added that the dollar price is still very high in the kerb market. So to increase remittances through formal channels, the dollar needs to be adjusted in both markets.
Mustafizur Rahman, Distinguished Fellow at the Centre for Policy Dialogue (CPD), told TBS, "If we want to control our trade deficit, we have to look at how to curtail imports. If we can increase exports and remittances at the same time, the trade deficit will be met."
He said, "Remittances in our outgoing FY22 are 15% lower than in the previous FY although it is higher than during Covid. However, in order to increase remittances, if the government adds incentives to the official rate, the gap in the kerb market can be reduced."
He, however, expressed hope: "About 1 lakh people are going abroad every month and we will get a good result in the current financial year."
In its monetary policy, the central bank blamed robust import growth for deteriorating external balance.
The monetary policy identified that extraordinary global commodity price hikes, the import growth of industrial raw materials, including raw cotton, yarn, textiles articles, pharmaceutical inputs, fertiliser, plastic and rubber articles; iron, steel and other base metals, and capital machinery predominantly made the overall import growth robust.
Higher volume and growth of imports than those of exports led to a vast trade deficit during July-May of FY22, the monetary policy stated.
The inward remittances, one of the vital factors for the stability of the current account balance, registered a negative growth mainly due to the Covid-19 pandemic-related job losses, dislocations and the reduction of expatriates' working days in different countries.
Moreover, use of the informal channels to some extent in sending remittance accelerated the dollar crisis, according to the monetary policy statement.