Payment capability reduced to 5-month from 11-mmonth
Abu Sazzad: Bangladesh is now capable to pay the import payment for the five months from the existing foreign reserve but such capability was for eleven months in the recent years, said Bangladesh Bank sources.
ACU payment, external debt payment and lower export earnings are major reasons behind decline the capability of import payment, said experts.
Meanwhile, the foreign exchange reserves decreased by US$ 987.50 million (3.02%) at the end of November’19 compared to the reserves hold at the end of June’19. Comparing with the reserves hold at the end of same period of last year, the current reserves increased by US$ 673.0 million (2.17%) at the end of November’19.
Bangladesh has made a routine payment of US$987 million to the Asian Clearing Union (ACU) against imports during the September-October period of this calendar year.
After the payment, the foreign exchange reserves held by the Bangladesh Bank stands at US$ 31,729.0 million at the end of November’19 while it was US$ 32,716.5million at the end of June’19., according to the central bank data.
“We’ll be able to settle import bills for more than five months with existing forex reserves,” a senior official of the Bangladesh Bank (BB).
He also said the central bank of Bangladesh has already remitted the fund to the ACU headquarters in Tehran in line with the existing provisions of the union.
Under the existing provisions, outstanding import bills and interest thereof are to be paid by the member countries at the end of every two months.
He also said the amount of ACU payment came down to $987 million during the period under review from $1.04 billion earlier mainly due to lower imports from the ACU member countries, particularly from India.
Bangladesh is now importing different consumer items, cotton, raw materials and capital machinery from the ACU member countries, especially from neighbouring India, the central banker added.
The ACU is an arrangement involving Bangladesh, Bhutan, India, Iran, Myanmar, Nepal, Pakistan, Sri Lanka and the Maldives through which intraregional transactions among the participating central banks are settled on a multilateral basis.
The union started its operation in November 1975 to boost trade among the member countries. Bangladesh and Myanmar joined the union as the sixth and seventh members in 1976 and 1977 respectively. Bhutan joined the ACU in December 1999 and the Maldives in January 2010.
Meanwhile, country’s external debt payment reached a new high of nearly $500 million in the first quarter (Q1) of this fiscal year. The quarterly debt-servicing data released by the finance division showed the repayment rose by over 24 per cent to US$ 495.2 million over the year-earlier period. The debt-servicing has shot up by the payment against mega projects such as Rooppur nuclear power plant, metro rail and Matarbari power plant at Moheskhali.
According to a Daily Industry report, Bangladesh export earnings have declined by 10.70% to $3.05 billion in November for the fourth consecutive month compared with the corresponding months of last year.
The fall is driven by a negative growth in the apparel sector, which contributes to over 84% of total exports earnings.
According to Export Promotion Bureau data, Bangladesh earned $3.05 billion in November, down by 10.70%, which was $3.42 billion in the same month last year. In October, the exports earning saw 17.19% decline to $3.07 billion.
However, experts have underscored the need for increasing export earnings as well as to increase the remittance earnings for higher reserve. ACU payment is a regular process for import payment but the declining of export earnings is a matter of concern.
Actually, Bangladesh is mainly depended on imported raw material for its industrial production, so, higher ACU payment is a must.
Apart from this, the government external debt payment is growing but the development of development project is not satisfactory which the concern is.
On the other hand, the earnings of export are gradually declining which is really a matter of concern for raising the reserve as well as boosting the economy of the country.