Depleting forex reserves intensify economic crisis further
Al Amin :
Economic crisis has deepened further as the country’s foreign currency reserve is decreasing unusually.
Importers are failing to open letters of credit (LCs) as per their requirement due to the dollar crunch resulting in the businesses are unwilling to invest in the country or expanding their firms newly.
As a result, unemployment is increasing gradually in the country.
According to the Bangladesh Bank latest data, the country’s foreign currency reserve fell by almost $1.47 billion in a span of eight days and now it stood at $21.71 billion, which was $23.18 on September 5.
Experts said the forex reserve is falling down as all sources of foreign currency – export, remittance and foreign loan – have been on the decline against the country’s import bill payment and repayment of foreign loans.
Dr Zahid Hussain, former lead economist of the World Bank Dhaka office, told The New Nation, “Remittances inflow has been declining for the last few months, while export earnings are not reaching the expected level. The situation is unlikely to improve soon.”
Meanwhile, Bangladesh is struggling hard to face the ongoing inflation, although the price of many essential commodities has decreased in the world market. But, it has no effect in the local market.
The country witnessed the highest food price inflation in almost a century in August. One of the reasons for this is the dollar crisis as the businesses are failing to import goods as per demand due to the dollar shortage.
The import decreased by about 16 per cent last fiscal year and the same trend has been seen in the first two months of the current financial year.
Opening and settlement of LCs fell by over 18 per cent and by over 22 per cent in the first two months (July-August) of the current fiscal year, according to the BB data.
The central bank has imposed various restrictions on imports as well as is selling dollars from the foreign currency reserve to overcome the crisis.
But these seem to be bringing opposite results to the country’s economy, the economists said.
Imports of capital machineries and raw materials used in industry have been declining mostly for the dollar crisis, which means the production and employment of the country is decreasing.
In the first two months, LC settlement for capital machineries decreased by 34.83 per cent, for raw materials used in industry by 32.58 per cent, petroleum by 27.62 per cent, intermediate goods by 13.78 per cent, and LC disposal of consumer goods by 0.72 per cent, the BB data showed.
Bangladesh earned $3.57 billion and $9.37 billion from remittances and exports in the first two months of the current fiscal year.
Economists believe that if this situation continues, it will not be easy to deal with inflation.
Dr Salehuddin Ahmed, former governor of Bangladesh Bank, said, “We could have avoided the ongoing economic crisis. But due to our lack of proper planning and wrong policy we could not avoid this crisis.”
“Specially, Bangladesh Bank could not take any effective initiative to reduce defaulted loans. On the other hand, we have not been able to remove irregularities and corruption from the financial sector.
It is still being tried to keep the country’s economy good artificially,” he added.
