Dollar shortage hits Bangladesh’s businesses, students

By Azad Majumder

Dhaka, Nov 18 (EFE).- Commercial banks in Bangladesh are struggling to settle import payments and fund students studying in universities overseas due to dollar shortages amid falling exports and foreign remittances.

The holding of foreign currency by private commercial banks is depleting fast as imports have risen significantly, making it harder for banks to open letters of credit for fresh imports.

According to the central Bangladesh Bank, the gross foreign currency balance with commercial banks fell to $4.5 billion in October from $5.2 billion at the end of June this year.

The rising imports also took a toll on the country’s foreign exchange reserve, which fell from $46.46 billion in October 2021 to a seven-year low of $35.81 billion in October 2022.

The reserve took a further dive to reach $34.30 billion on Nov.17, according to the central data.

“We are passing a difficult time as our current account position has become significantly negative,” said Syed Mahbubur Rahman, Managing Director of Bangladesh’s private commercial bank Mutual Trust Bank (MTB), told EFE.

“There was a pent-up demand after Covid. Our monthly imports rose from roughly $6 billion to $9 billion in recent times. It created a big gap between the receipt and the payment. Plus, due to global inflation, our import value rose,” he said.

Bangladesh Bank data showed that the opening of letters of credit in the first quarter of the ongoing fiscal year between July and September fell by 8.57 percent to $18.58 billion from $20.32 billion in the same period of the previous fiscal year.

Rahman, also a former chairman of the Association of Bankers, acknowledged that due to the shortage of foreign currency, banks were not only struggling to settle import payments but also becoming very selective in opening files for foreign students.

The UN education agency UNESCO said in its 2022 ‘Global Flow of Tertiary Level Students’ report that 49,151 Bangladeshi students went abroad for higher studies in 2021.

The number is only growing, with the US embassy in Dhaka saying that the country alone received 10,597 during the 2021-2022 academic year, a 23.3 percent increase from the previous year.

“It’s not that we have completely stopped opening files for foreign students. But we are selective and are trying to serve only our existing customers. We have to cut our coats according to our clothes,” Rahman said.

Remittances and export earnings are the two premium tools for bankers to meet the demand for dollars, but both showed a downward trend in the recently released government data.

Bangladesh’s monthly inward remittance dropped to $1.52 billion in October, the lowest in eight months.

In 2021–22, Bangladesh received foreign remittances of $20.31 billion, down from $24.77 billion in the previous fiscal.

Data from the Bangladesh Export Promotion Bureau showed that overall export earnings in October of the current financial year fell by 7.85 percent to $4.35 billion from $4.72 billion in the same month of the previous year.

“We are facing an emergency situation. No normal system is working here now,” said Mohammad Hatem, president of the Bangladesh Knitwear Manufacturers and Exporters Association.

Hatem said production in many of their factories fell significantly in recent months due to gas and electricity supply shortages.

He said that the bankers’ reluctance to open letters of credit doubled their agony as they also faced a shortage of raw materials.