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BKMEA requests BB to reset dollar value

Foreign exchange earnings through remittance flows and exports contribute equally to the country’s reserve growth. In this case, the dollar exchange rate of remittance and export earnings should also be the same. BKMEA has requested the Governor of Bangladesh Bank to revalue the dollar at the same rate for monetization of export earnings.

BKMEA requests BB_dollar value
Figure: BKMEA requests BB to reset dollar value.

Recently, Bankers Association and Bangladesh Foreign Exchange Dealers Association (BAFEDA) have set separate exchange rate of dollar for remittance and export with the approval of Bangladesh Bank.

In case of remittance, the maximum exchange rate of dollar will be 108 taka and 2.5 percent incentive will be added to this which means TK 110.50 in total. On the other hand, exporters will get a maximum exchange rate of TK 99. In this, the gap between monetization of expatriate income and export income stands at TK 11.50.

Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) says that such discriminatory exchange rate of dollars created by monetizing remittances and export earnings is not acceptable in any way.

In this regard, a letter signed by BKMEA Executive President Mohammad Hatem was sent to Bangladesh Bank Governor Abdur Rauf Talukder last Saturday (October 8).

The letter said that the contribution of the garment industry to the economy of Bangladesh is undeniable. In the last fiscal year 2021-22, Bangladesh earned more than $52 billion in foreign exchange from the export sector, 82 percent of which came from the export of ready-made garments.

Garment industry is one of the main sectors for industrialization of the country, employment generation and earning of foreign exchange. BKMEA as an association of knit traders, is continuously working to ensure the overall welfare of the knit sector, expand new markets, and sustain their acceptance in the competitive market, the letter said.

In FY 2021-22, the net export revenue from knit sector was $23.21 billion, which is 36.88 percent higher than last year. We are mainly dependent on imports for various raw materials used in our garments and dyes, chemicals used in dyeing. Due to the increase in the price of oil in the international market, transportation costs and other ancillary products including industrial raw materials, our production costs have increased to a large extent than before, the letter said also.

Therefore, BKMEA has also given four proposals in the letter to bring balance in imports and exports. These are:

  1. Consider the views of BKMEA and BGMEA as the largest trade organizations in the export sector along with Bankers Association and BAFEDA in determining the exchange rate of the dollar. In this case, only the government and Bangladesh Bank will have the authority to determine the dollar value.
  2. Currently, most of our export prices are deferred, which in most cases reach a time frame of 60-180 days. On the other hand, we get 90-120 days to clear the import debt for the raw material we are importing through back to back LC.

While TK 104.50 is fixed for repayment of import debt, banks are buying the dollar at TK 105-106 for back-to-back LCs or any other import liabilities. On the other hand, according to the decision, we can get a maximum of TK 99. In this principled process of dollar conversion, we are facing a huge amount of loss, which is by no means desirable.

As a result of this process, a large shortfall will be created at the end of the year. It will not be possible for traders to adjust this shortfall in any way. In this case, Bangladesh Bank may instruct the commercial banks to coordinate back to back LC debt payments through EDF as before.

  1. In any case, the difference between the buying and selling price of a dollar should not be more than one taka.
  2. Bangladesh Bank may give instructions to restore the value of the dollar at the same rate in the case of financing export earnings to keep the wheels of the country’s garment industry moving.

On September 26, the Bangladesh Textile Mills Association (BTMA) made a similar request to fix the dollar rate.

If anyone has any feedback or input regarding the published news, please contact: info@textiletoday.com.bd

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