Buyers will pass hiked interest rate onto us
The world is now heading for a kind of recession, with Russia's war in Ukraine piling one shock on top of another on the global economies that are yet to fully dispel pandemic blues.
In such a situation, the US move to raise the interest rate by the biggest margin in over 28 years will deal another big blow to the world. We cannot stay out of it either.
The increased dollar interest rate will ripple out to us in the form of lower apparel export orders following decreased sales of buyers. Moreover, buyers will also try to pass the increased interest rate in the US and European Union on to readymade garment suppliers by lowering prices of goods.
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For example, they might offer $1.9 for a tee-shirt instead of the current $2. Then we will have to think about what will minimise our losses - continuation of factory operation to pay salaries to workers and repay bank loans even at losses, or shutting down factories.
Maybe, our losses will be lower if we accept work orders even at lower prices. So, we will have no option other than keeping factories running.
We have already suffered a lot because of rising dollar prices. The rate we get for our export proceeds is Tk89-90 per dollar, while we have to purchase dollars for importing raw materials at higher rates. Exporters have not benefited from higher dollar prices.
Mohammad Hatem is Executive President of BKMEA
