Dollar rate gap between LCs, export earnings should be maximum Tk1: BKMEA

The Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) has written to the finance ministry and the Bangladesh Bank to reduce the gap between the dollar rates for importing raw materials and encashing export proceeds to Tk1.

In the letter sent 8 October, the organisation also proposed making the dollar rate for encashing export earnings equal to the dollar rate of remittances – Tk108.

In the letter, the BKMEA said exporters currently get Tk99 per dollar for encashing export earnings. While the dollar rate for payment of import debt is fixed at Tk104.5, banks are buying dollars at Tk105- 106 in case of back-to-back LC or any other import liability payment.

Currently, most export payments are deferred to a period of 60-180 days. On the other hand, the raw material import debt has to be paid within 90-120 days of opening back-to-back LC.

In this process of dollar conversion, exporters are facing huge losses, which is by no means desirable, said the BKMEA.

It also said by the end of the year, the exporters will face a major capital crisis, which will not be possible to adjust. In this case, the BKMEA has sought a scope of coordinating the debt repayment of back-to-back LCs through the Export Development Fund (EDF) as before.

The BKMEA has urged the authorities concerned to take the views of the Association of Bankers, Bangladesh and the Bangladesh Foreign Exchange Dealers Association (Bafeda) as well as the BKMEA and the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) into consideration in determining the dollar rate.

When asked about the matter, BKMEA Executive President Mohammad Hatem told The Business Standard, "A medium quality knitwear exporter is losing about Tk1 crore per month due to the large difference in dollar rates in export earning encashment and meeting import liabilities."

"Before the Russia-Ukraine war, when the dollar rate was Tk83-84, the gap between the rates of buying and selling dollars was about Tk0.50. Now it can be maximum Tk1. A gap larger than this is not desirable at all," he added.

At present, banks are offering Tk108 per dollar for remittances sent by expatriates. Seeking the same rate for encashing export earnings, the BKMEA said both remittances and export earnings contribute equally to the growth of foreign exchange reserves.

Currently, in case of remittance, banks are providing Tk110.70 per dollar after adding the 2.5% cash incentive announced by the government. On the other hand, in the case of export proceeds they are giving Tk99 per dollar.

Mohammad Hatem said such discriminatory exchange rate of dollars for remittance and export earnings is not acceptable in any way and they should be the same.