Friday, 29 March, 2024, 8:45 PM
Advance Search
Home

Excess forex reserve could be used as refinancing fund

Published : Friday, 20 November, 2020 at 12:00 AM  Count : 281

Mohd Khorshed Alam

Mohd Khorshed Alam

Use of country's foreign exchange (forex) reserve including at least five month's import bills could be used in different ways. The import bill can be used for refinancing funds to invest in apparel sectors aiming to develop more backward linkage industries that readymade garments exporters can add more value to their exports by outsourcing fabrics, accessories and many others locally.

Currently Bangladesh do have over $41 billion of foreign currency reserves with Bangladesh Bank and the amount is worth more than making import payments for around nine months.

As per government's policy it is to keep reserves of paying import bills for at least three months, so there is six months more than requirements.

As per different statistics, reserve with Bangladesh's central bank is the fourth largest in Southeast Asia which is good in numbers and it is increasing despite the prolonged pandemic situation hit economy globally.

Why the reserve is increasing and will it continue as per existing flow? A couple of facts are helping at piling up of forex reserve and the main cause is dropping import amount and rush of sending money by expatriates Bangladeshis.

The another cause is at the declaration of 2  per cent incentives on remittance inflow, now it is coming in legal channels and as per estimation illegal inflow has dropped over 50 per cent as senders can now get extra money against their foreign currencies that they send to Bangladesh.

We know the main sources of incoming foreign currency to Bangladesh are remittance, export and foreign direct investments and loans and grants. Of these remittance and export are the major which is contributing to the local economy and thee is extra reserve of foreign currencies.

As the economic activities are in back to its new normal of pandemic situation, import may increase and at this stage we can keep five months' import payment instead of three months and a part of the excess reserve could be used as refinancing funds to the apparel exporters, textile millers and export oriented sectors that they can invest in composite textiles, accessories and in many others which ultimately could add more local values to the exports.

Currently major per cent of the export earnings are spent in paying import bills by the readymade garments exporters as they import their required fabrics and few others as per the buyers' demands.

As per data garments industries import fabrics, accessories and many others against their export orders which counts over 60 per cent of the export earnings.

China's example could be made here that how did they increase reserve. They did a policy that they will stockpile their export earned foreign currency as their central reserve and will use locally manufactured products to their exports that resulted in increase of their reserves.

Garments exporters at the existing local backward linkage industry can also reduce their import costs if they wish as major per cent of the imported raw material against export is locally available. And if the exporters use local products instead of import, it will significantly drop and there will be more reserve of foreign currency.

Now the point that how the idle forex reserves fund could be refinanced to the local industrialists and in answer of this point I suggest that it could be in multiple instalments.

We can increase the supply for exporters locally as we are already experienced and we do have the talents to meet maximum demands for raw materials as fabrics, packaging, accessories and many others for RMG exporters.

The reserve could be used as refinancing to the industrialists to set up composite mills for producing high end woven and knit fabrics, and many other accessories. Then we will not be needed for import of fabrics for exports as well as there is a big local market for fabrics so investments will be profitable.

If the garment exporters want to take the money from the government, they could be given the money in five years duration and in different instalments such as first 10 per cent later 20 per cent and follow on as per development of the projects.

Therefore, in this process there will be no need for importing fabrics and reserve will be utilized. The reserve utilization in textile and garments sectors are safe as despite the prolonged pandemic of coronavirus these two are still doing better and even its local market has increased in compare with other sectors.

Apart from RMG and textile other sectors are also good and exports increased of few products like leather, agriculture, vegetable, pharmaceuticals and many others. Our Europeans are showing their interests of importing from Bangladesh and in the coming days it will increase more. We should not be frustrated as our market both local and global market size is increasing.

Remittance inflow that increasing forex reserve should be considered as life line of economy and there should measures to help them once they back to the country. Currently they are not treated in well manner and after arriving in the airport they face different hassles.

As Bangladesh is economically developing, we need experienced workers so the coming migrant workers could be a source of skilled manpower in development of the country's infrastructure and in many other sectors.

Our embassies and diplomats can also play a good role to inspire expatriate workers when they work in foreign lands. They can look after them and can offer any kind of supports when they face trouble.

It is a matter of courage if our diplomats make phone calls to the migrant workers in foriegn lands to know their problems and provide supports if needed. Currently no one is doing this which is done by many countries diplomats.

The government should support our expatriate manpower who are after coming to the country are now stranded. Additional flights should be made for them that they can join their works abroad.

If a US or China citizen comes in Bangladesh for his/her job or others purpose their embassies records his arrival and makes phone call about his jobs and whether facing troubles or not.

Our young generation can contribute also a lot in earning more foreign currencies by enhancing skills for both in local sectors and in abroad.

The writer is Chairman of the Little Group and an expert in apparel sector






Latest News
Most Read News
Editor : Iqbal Sobhan Chowdhury
Published by the Editor on behalf of the Observer Ltd. from Globe Printers, 24/A, New Eskaton Road, Ramna, Dhaka.
Editorial, News and Commercial Offices : Aziz Bhaban (2nd floor), 93, Motijheel C/A, Dhaka-1000.
Phone: PABX- 41053001-06; Online: 41053014; Advertisement: 41053012.
E-mail: info©dailyobserverbd.com, news©dailyobserverbd.com, advertisement©dailyobserverbd.com, For Online Edition: mailobserverbd©gmail.com
  [ABOUT US]     [CONTACT US]   [AD RATE]   Developed & Maintenance by i2soft