Money laundering, external debt repayments mount stress on forex reserve

Staff Reporter :
The money laundering and rising external debt repayments mounting further stress on country’s shrinking forex reserve which stood at $23.45 billion according to the BPM6 (Balance of Payments and International Investment Position) method in July this year while the reserve (Gross) was $39.59 billion in July of the previous year.

Economists identified the amount of reserve has entered the “red zone’ and it would be alarming for the economy if it slips further.

Currently, Bangladesh is facing an increasing pressure on foreign debt payments as its annual loan repayment rose by more than 37 per cent in the outgoing fiscal year of 2022-23 compared to the previous fiscal. In last six years, the amount of loan payments has doubled.

According to sources from the Economic Relations Division (ERD), Bangladesh paid a foreign debt of USD 2.74 billion, including principal and interest, in the outgoing fiscal year, while the amount was USD 2.01 billion in 2021-22. This means the payment of loans increased by USD 730 million in just one year.

Bangladesh will have to make payment of USD 3.28 billion in the current financial year of 2023-24.

Likewise, continuous money laundering creates macroeconomic distortion in various ways despite some attempts by the authority to curve the amount.

A number of reports released by Global Financial Integrity (GFI) in recent times have pinpointed Bangladesh

as being among the worst affected countries to the scourge of trade-based money laundering (TBML).

It is alleged on an average, more than $ 7.50 billion is said to be siphoned off annually from Bangladesh through trade miss-invoicing and illegal money outflow, an official said.

The Criminal Investigation Department (CID) informed that the amount of money being smuggled out of the country through hundi has increased at an unusual rate.
According to CID, only in the year of 2021 hundi traders have smuggled Tk 75 thousand crore.

Besides, Around Tk 730 billion is laundered from Bangladesh every year through gold smuggling, Bangladesh Jewellers’ Association (BAJUS) claimed at a recent press conference.

Meanwhile, the names of some individuals and organizations involved in money laundering had been revealed in the national and international papers, hardly any action has been taken against them.

It is recently reported that S Alam Group owner Mohammed Saiful Alam built a business empire in Singapore worth at least about $1 billion, although there was no record of him taking any permission from Bangladesh Bank to invest or transfer any funds abroad.

Proshanta Kumar Halder, known as PK Halder, and 13 others also over laundering Tk 80 crore to Canada and amassing about Tk 426 crore illegally.

Returning to the question of increasing external debt repayments, Ahsan H Mansur, Executive Director of Policy Research Institute (PRI) said that pressure of repayment just started.

The amount of repayment rose by 30 per cent in the last fiscal because repayment of loans taken from Russia, China and India with tough conditions has begun. These loans will have to be paid in the next 15-20 years.

Regarding money laundering, eminent economist Debapriya Bhattacharya said that money laundering cannot be stopped only with institutional measures.

Political will is needed the most for this. In the absence of political will, there is no solution to money laundering, he added.

Meanwhile, In FY23, the foreign currency reserve endured a significant blow, losing nearly US$11 billion. From over $41 billion in June 2022, the reserves plummeted to $31 billion by June 2023, and have further dwindled to $29 billion currently.