Set dollar at Tk108 for us, exporters tell central bank

Textile millers have urged the Bangladesh Bank to revise up the dollar rate at Tk108 from Tk99 for encashment of export proceeds as in the case of remittance earnings to help them stay afloat surviving multifarious external and internal shocks.

The "discriminatory" exchange rates, if not streamlined, will turn the capital-intensive textile industry – which contributes about $29 billion to the annual apparel export earnings of over $44 billion as a backward linkage industry – sick within a short time, which will cause lakhs of job losses, having a spillover impact on the readymade garment exports,  they fear.

According to sources at the Bangladesh Textile Mills Association (BTMA), the textile sector employs about 10 lakh people and has a total investment of over $16 billion.

Textile millers said they are already under severe strains owing to increased fuel and raw materials prices, freight charges in the wake of the Covid pandemic and then the Russia-Ukraine war, and reduced output because of shortages in electricity and gas supply. This has led to a rise in their overhead cost.

"The central bank announced different dollar rates for payment of import bills and encashment of export proceeds, which will make our survival difficult," reads a letter sent to the central bank governor by BTMA President Mohammad Ali Khokon on Monday.

Mentioning that the dollar exchange rate for exporters in Bangladesh has been fixed at Tk99, the letter said in Bangladesh's competing countries the dollar is much higher. For example, exporters in Pakistan get 260 rupees against $1.

Textile millers in most of Bangladesh's competing countries have another advantage – they can source raw materials locally, while those in Bangladesh have to import raw materials at high costs to feed the export-oriented apparel industries to maintain their shorter lead time.  

Echoing the textile millers, Mohammad Hatem, executive president of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), the dollar rate should be non-discriminatory for all and the gap between selling and buying rates of dollar should not be more than Tk1.

He also mentioned that a large number of exporters are not eligible to even get the central bank-fixed dollar rate for export earnings as they are forced to sell their export documents before repatriating their export proceeds at a lower rate to maintain their cash flow.

"If the central bank does not revise this rate, my company will face a shortfall of about Tk10 crore by the end of this fiscal year for the same reason," said Hatem. 

Expressing similar concerns, Sparrow Group Managing Director Shovon Islam said different rates of the dollar are discriminatory for exporters as most foreign currencies come to the country through them. 

"We want an open market for dollar trading. Fixing rates can never be a good idea. We should not control the dollar rates as it might backfire," he added. 

Apparel industry leaders feared that the ongoing Russia-Ukraine war-led economic slowdown and the US dollar getting stronger against major currencies have affected consumers' buying capacity. 

As a result, apparel exporters received at least 20% fewer orders than their production capacity in the last two months, said industry insiders. 

Slumping demand, falling orders   

Apparel leaders fear the slumping demand by Western buyers may persist as the prolonged Russia-Ukraine conflict continues to upend economies and strong greenback erodes purchasing capacity of consumers.       

They said Western orders in the last two months were 20% less than their production capacity.      

British Sterling slumped to all-time low on Monday, according to Reuters, prompting speculation of an emergency response from the Bank of England.

The pound plunged nearly 5% at one point to $1.0327, breaking below 1985 lows. On the other hands, Euro down 1%; Aussie, kiwi, yuan hit multi year lows, S&P 500 futures drop 0.6%

Mohammad Hatem, executive president of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), as the EU market makes up 70% of Bangladesh's knitwear export, an economic slowdown in Europe will have a severe impact on the export outlook.  

Kutubuddin Ahmed, founder of Envoy Textile Ltd, also mentioned when the dollar becomes strong, shopping gets costlier for many western nations.   

After a prolonged spell of growth for 13 months, Bangladesh's apparel exports have started to see the flipside – the country registered more than 12% year-on-year negative growth in the first 18 days of September.

In these 18 days, the readymade garment sector raked in $1.72 billion in contrast to $1.96 billion in the same period last fiscal year, according to the Bangladesh Garment Manufacturers and Exporters Association (BGMEA).
 
Inconsistent gas pressure does the slow burn  

Yarn and fabrics production fell 20%-30% in Narayangonj and Gazipur thanks to the ongoing gas supply crunch, said exporters.

Monsoor Ahmed, additional director of the Bangladesh Textile Mills Association (BTMA), said a number of factories informed them about "zero gas pressure" in Gazipur industrial zone on Monday night.

Other industrial zones are also facing the similar issue for the last two months, he said.

In a recent letter to the state minister for energy, power and mineral resources, the textile mills association said the gas crisis upends the day-to-day normal activities across the greater Gazipur, Sreepur and Bhaluka industrial belt.

Monsoor Ahmed said the association now wants to meet with the Petrobangla chairman seeking a solution before their next board meeting on 29 September.  

Apart from apparel, the gas crunch also hurts power generation.

The Rural Power Company Limited, an autonomous government company located in Gazipur that produces power from gas, said it has also been facing an inconsistent gas pressure leading to production hiccups.