$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.