Exporters find dollar rate discriminatory

Exporters have found the dollar rate for them discriminatory and fear that the capping of dollars at two different exchange rates for remittances and export proceeds might give rise to money laundering through under-invoicing.

Many exporters will bring home export proceeds in the form of remittances and enjoy cash incentives, they also say.

The rate for inward remittances has been set at Tk108 and Tk99 for export proceeds that have taken effect from 12 September as part of an effort to curb volatility in the country's foreign exchange market.

Such uniform rates may not bring any benefit for exporters, importers and remittance inflows in the long run, except for banks, according to the exporters.

Seeking anonymity, a number of leading exporters also told The Business Standard that continuing the fixed rates for a long time will have a negative impact on export earnings as some exporters will try to find an alternative way to cash more profits from dollars.

Explaining further, they said exporters having offshore offices may keep a portion of their earnings there or bring home that part as remittances.

Talking to TBS, Rakibul Alam Chowdhury, vice-president of Bangladesh Garment Manufacturers and Exporters Association (BGMEA), said exporters have lost the opportunity to negotiate with banks, the lone beneficiaries of the newly-set uniform dollar rate.

"Earlier I had received Tk106 against a dollar, it has now come down to Tk99, which is not rational," he said.

Right now, no exporters will exchange their export proceeds unless it is very necessary, he noted, adding, "We will wait 30 days as the current rules allow us that time for retention of our export proceeds."

Shovon Islam, managing director of Sparrow Group, said most foreign currencies come through exporters. Why will they face such a discriminatory rate?  This is totally unfair. 

The rate set for encashing export proceeds has come as another blow to exports at a time when they are negotiating with the central bank to remove the bar on selling dollars to banks that offer higher rates. 

"We want an open market for dollar trading. Fixing rates is never a good idea. We should not control the dollar rates that might backfire."

He also requested that initiatives be taken to control imports of consumer items to give relief to forex reserves now under strain. 

Shams Mahmud, managing director of Shasha Denim, said, "Currency devaluation is a good move but if we should have done this much earlier. Then we would not have to encounter such a volatile situation." 

The uniform rates for dollars have immediately had a triple impact on them – foreign loan payments will see at least 30% cost hike, export earnings will be lower and new investment cost will be higher than the previous estimates, he pointed out. 

He also said exporters will have to pay more for their local procurements after the new move. 

Earlier, Zahid Hussain, former lead economist of the World Bank's Dhaka office, told TBS, "It would be difficult to enforce uniform rates set by Bafeda as it is a peculiar system. Some banks will have higher remittance inflows, while others will have more export encashment, then the LC settlement rate of the ones whose remittance is more will be higher. Consumers tend to lean towards where they get a lower rate."

He said there is a gap of Tk9 between remittance collection and export bill encashment. As a result, exports are at risk of under-invoicing.

"If exporters do under-invoicing and bring their proceeds as remittances, they will get Tk9 more against each dollar and another Tk2.5 as an incentive. It may create a new way of under-invoicing," he added.

Zahid Hussain said now money laundering will take place through export under-invoicing.

It is not clear how supply and demand balancing will happen, he added.