Export ends year on high note, remittance holds pace 

Infographics: TBS

As 2023 came to a close, Bangladesh experienced a positive turn of events, witnessing the highest export and remittance earnings in months, which offered a much-needed relief for the diminishing foreign exchange reserves.

In December, Bangladesh's merchandise export earnings reached nearly $5.31 billion on the festival sales boost in the West, marking the monthly highest for the entire year, say Export Promotion Bureau (EPB) data released on Tuesday (2 January).

Bangladesh Bank data show a 17% year-on-year surge in inward remittances to $1.99 billion in December, the highest in the last six months.

However, December's exports experienced a marginal dip of 1.06% compared to the same month in 2022, when earnings stood at $5.36 billion.

Bangladesh Garment Manufacturers and Exporters Association (BGMEA) President Faruque Hassan said, "In the beginning of 2023, we were able to cover some of the decreasing orders with value. But the value also started going negative for the last three months."

Referring to a decrease in inflation in Europe and the US, he said there is hope for a turnaround in exports.

However, for the entire year 2023, growth increased slightly amid a decline in global apparel demand, he told The Business Standard.

He said that in the days to come, they will have to face many challenges as the minimum wage in factories increased starting in December last year, bank interest rates have risen, and gas and electricity prices have increased, leading to a significant rise in the cost of production.

Hope for a turnaround in 2024

Retail shops in our export destinations received a positive consumer response in November and December. However, it is not yet time to assert that the market has significantly improved; moreover, there have been some promising developments,  BGMEA President Faruque Hassan said. 

Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) Vice President Fazlee Shamim Ehsan expressed hope that after the first quarter of 2024, Bangladesh's apparel exports may return to a positive trend.

The member countries of the Organisation for Economic Co-operation and Development (OECD) are forecast to experience a decrease in inflation to 3.2%, and their GDP is projected to grow by 1.2% in 2024, he added.

We anticipate that Bangladesh's apparel exports will improve in the second quarter of 2024.

BKMEA leader Ehsan said, as per data from our main export markets (EU and USA), apparel exports to both destinations are declining due to high inflation.

Apparel exports to the US in the first 10 months of 2023 fell by 24.75% to $6.36 billion, compared to $8.45 billion in the same period of 2022, according to data from the US Department of Commerce's Office of Textiles and Apparel.

Data from Eurostat, the statistical office of the European Union, also showed that Bangladesh apparel exports fell by 17.66% to €13.69 billion in the first nine months of 2023.

Infographics: TBS

EPB data show Bangladesh's export earnings for the July-December period of the current fiscal year totalled $27.54 billion. This represents a modest 0.84% increase compared to the corresponding period in the preceding year.

The apparel industry, a cornerstone of Bangladesh's exports, experienced marginal growth, with ready-made garment exports rising by 1.72% to $23.39 billion, constituting around 85% of the country's total exports over the last six months. Also, knitwear demonstrated single-digit growth, while woven textiles have shown a decline in performance for several consecutive months.

Other major export sectors faced challenges, with products like frozen and live fish, leather and leather goods, jute and jute goods, home textiles, and footwear experiencing negative growth during the July-December period.

Surge in remittances 

This surge is part of a larger upward trend in remittances, with the inflow reaching $10.79 billion during the July-December period, compared to $10.49 billion in the corresponding time the previous year.

Bankers attributed this surge to some flexibility in the dollar rate permitted by the Bangladesh Bank.

Banks are making efforts to increase the flow of dollars at the end of the year. They have taken several measures to enhance remittance flow. As a result, remittances have increased, Syed Mahbubur Rahman, managing director at Mutual Trust Bank, told The Business Standard in December.

Professor Mustafizur Rahman, a distinguished fellow at the Centre for Policy Dialogue (CPD), told TBS, Dollar inflows increased due to market-based dollar rate adjustments. It is very comfortable to increase reserves at the same time to meet our dollar crisis.

The number of Bangladeshi expatriates abroad is increasing, but the flow of dollars has not seen a corresponding increase. We had previously mentioned that our remittance inflow was low due to the non-market-based exchange rate, he added.

The economist said the dollar rate has now increased. In addition, banks can contribute a maximum of 5%, along with 2.5% from the government, contributing to the increase in remittance flow.

Our garment export growth has not picked up significantly till November of the current fiscal year. However, non-garment export growth was good, he said. While Christmas boosts the export of garment products, overall exports have also increased. Exploring how to sustain this growth should be a focus.

He said at the same time, adjusting the market rate of the dollar to reduce the hundi trend and implementing measures to curb money laundering should be priorities.

Asked whether remittance growth will continue in 2024, he said, This flow will persist if the dollar rate remains market-based. It will also minimise pressure on the government, which pays a significant amount of incentives on remittances.

According to senior officials at several banks, the current decision of the Association of Bankers, Bangladesh (ABB) and the Bangladesh Foreign Exchange Dealers Association (Bafeda) dictates that banks will pay a maximum dollar rate of Tk109.50 for collecting remittances.

Additionally, banks can provide a 2.5% incentive from their funds, allowing them to offer a maximum dollar rate of Tk112.24 for remittances.

However, many banks are not adhering to the dollar rate determined by the central bank through these two platforms of bank managing directors, as they are buying remittance dollars from exchange houses at a maximum rate of Tk122.

The managing director of a leading private bank said, in several incidents, the central bank has come to understand that remittance inflows decrease when banks are under too much pressure on the dollar rate of remittances.

Meanwhile, remittance earnings stood at $21.61 billion in FY23.

The World Bank estimates that remittance flows to Bangladesh are projected to remain at $23 billion in 2024, according to the WB's latest Migration and Development Brief released on 18 December.