Bangladesh on its way to Sri Lanka! Forex reserves left for imports only for 5 months
Sri Lanka has already become poor, now the clouds of financial crisis are hovering over the neighboring country Bangladesh as well. There is a steady decline in the foreign exchange reserves of Bangladesh. Bangladesh’s import expenditure has increased due to the rise in the prices of commodities, fuel, freight and food items in the international market. Between July 2021 and March 2022, there has been a huge increase in spending on goods made by Bangladesh.
Increased spending on imports
According to Bangladeshi media reports, the expenditure on imports has increased but the income from exports has not increased compared to that. Due to this the trade deficit is increasing continuously. More dollars have to be spent on imports, as compared to exports, foreign exchange has not been received, due to which foreign exchange reserves are decreasing.
According to reports, there is a decline in foreign exchange reserves. And through the amount of foreign exchange reserves left, import requirements can be met only for 5 months. And if the prices of commodities, crude and food items continue to rise, the stock may run out even before five months. Between July and March of 2021-22, Bangladesh has imported industrial raw materials worth $ 22 billion. Which is 54 percent more than last year. The import bill has increased by 87 percent due to the rise in crude oil prices. The import bill has increased by 41 percent on the import of consumer products. It is clear from these figures that the expenditure on imports is increasing.
Exports increased but foreign exchange came down
Bangladesh’s export target was met within 10 months of the 2021-22 financial year. Bangladesh exported products worth $43.34 billion. Which is 35 percent more than last year. Between July 2021 and April 2022, garments exports, exports of leather and its products have increased to more than one billion US dollars. The export of June and its products has also earned close to one billion dollars. In such a situation, even if the import bill of Bangladesh has increased, the income from exports can increase. But despite the increase in exports, the income has decreased. There is a difference of about 8 rupees in the bank and open market in dollar prices. Due to this, people are sending foreign currency illegally to Bangladeshi migrants, due to which there is a shortage of foreign exchange with the central bank. According to Bangladesh’s central bank, expatriates sent foreign exchange reserves of more than $ 26 billion in 2020-21, which has come down to close to $ 17 billion in 2021-22.
Make up trade deficit
Due to the widening trade deficit, the Reserve Bank of Bangladesh had to spend more than $ 5 billion from its foreign exchange reserves. The local currency is getting weaker against the dollar. The central bank has fixed the exchange rate of taka and dollar at 86.7 taka but banks are charging 95 taka from importers. Due to which the prices of imported goods have increased due to which inflation has increased.
The government of Bangladesh has banned the import of luxury products to deal with the dollar crisis, and has banned the foreign travel of government officials. Also, it can temporarily ban the construction of non-essential projects. At present, Bangladesh has foreign exchange reserves of $ 42 billion. But IMF is pressurizing Bangladesh to calculate foreign exchange correctly. If Bangladesh agrees to the IMF, then Bangladesh’s foreign exchange reserves may decrease by $ 7 to 8 billion, which can increase the crisis.
