Exports and remittances, two major sources of foreign currencies for Bangladesh, plunged in April, a bad omen for the economy as it deals with multiple challenges, including a dollar crisis, an elevated level of import costs and falling reserves. Export earnings slumped 16.5 per cent year-on-year to $3.95 billion last month.
And despite a surge in the outflow of migrant workers in 2022, remittances sent by migrant workers and non-resident Bangladeshis living abroad dropped 16.2 per cent to $1.68 billion, the sharpest fall in 14 months. Exporters blame the falling flow of orders from the Western markets on higher inflation while bankers say migrant workers prefer to send money through informal channels.
The decrease in export and remittances is terrible for the economy. The latest data comes at a time when Bangladesh’s foreign exchange reserves are falling as export and remittances earnings can’t cover the cost of imports despite its slowdown. The taka lost about 25 per cent in value against the greenback in the past one year, raising the import costs and the prices of imported goods to a large extent.
Another factor may be the effect on demand following measures taken by Western countries to contain inflation. Under the current circumstances, prudent macroeconomic management has become important to stabilise the economy and contain the risks. The shipment of garments, which account for about 85 per cent of the national export basket, declined 15.4 per cent year-on-year in April.
However, Bangladesh’s overall receipts from the shipment of goods grew 5.38 per cent to $45.67 billion between July and April. Bangladesh Bank data showed that remittances flow in April was lower than the overall inflow in March when migrants sent home $2 billion, the third-highest in FY23, to enable their families and relatives to celebrate the Eid-ul-Fitr. Overall remittances flow grew 2 per cent year-on-year to $17.7 billion between July and April.
The entire macroeconomy may face problems if remittances and export earnings decrease. Bangladesh is in an economic crisis due to prolonged political crisis that can be reversed unless Bangladesh comes back on the right track.