THE DAILY STAR – Export earnings, the largest source of foreign currencies for Bangladesh, slowed in May reflecting the fall in demand in western economies reeling from the crisis caused by higher inflation, the Russian – Ukraine war and supply chain bottlenecks.
The country earned USD3.83 billion in merchandise exports last month, up 23.24 per cent year-on-year but the lowest in nine months, according to data released yesterday by the Export Promotion Bureau (EPB).
It came a day after Bangladesh Bank data showed that remittance flows, the cheapest source of US dollars for the country, declined 13.15 per cent year-on-year in May.
The deceleration in exports and the decline in money transferred by migrant workers will intensify pressure on the country’s foreign currency reserves as imports have escalated owing to higher commodity prices.
From September to April, exporters raked in more than USD4.50 billion per month as demand surged in keeping with the receding pandemic.
The highest export earnings in Bangladesh’s history were recorded in December when shipment brought home USD4.90 billion.
The deceleration in earnings in May means the country received almost USD1 billion less than the average registered between September and April.
Overall, entrepreneurs posted 34 per cent year-on-year growth in export earnings to USD47.17 billion in the July-May period of the current fiscal year of 2021-22.
Garment shipment, which accounts for around 85 per cent of national international earnings, grew 34.87 per cent year-on-year to USD38.52 billion during the 11-month period.
Knitwear shipment was up 36.61 per cent to USD20.98 billion and woven garment export grew 32.85 per cent to USD17.53 billion. Home textile exports surged 41.3 per cent to fetch USD1.46 billion.
Chairman of Envoy Textile Ltd Kutubuddin Ahmed, said since the purchasing power of western consumers is declining due to accelerating inflation, the clothing items are not on their priority list.
“So, local suppliers may face work order cancellation and deferral payments again that they witnessed during the peak of Covid-19,” he said.
In April, inflation stood at 8.3 per cent in the US, nine per cent in the UK and 7.4 per cent in Germany, the highest in 40 years in all of the countries. Inflation hit 6.8 per cent in Canada, the highest since January 1991.
The four are major export destinations for Bangladesh.
What is even more distressing, the odds of a recession in Europe, the US, and China are significant. If this translates into reality, demand in the western economies could fall further, hitting exporting nations like Bangladesh.
Ahmed, whose company mainly supplies denim products to European retailers and brands, said some international retailers and brands have already started demanding 2.5 per cent to five per cent discounts on consignments.
“Moreover, the import costs have started climbing up.”
For instance, Ahmed opened letters of credit (LCs) for importing machinery from Italy and Germany, but the suppliers are deferring the delivery of machinery and asking for 20 per cent more price on the excuse of the war.
“Now, we are facing a crisis because of the war,” he said.
President of the Bangladesh Garment Manufacturers and Exporters Association Faruque Hassan, said the export slowed a bit because of the Aidilfitri holidays when factories were closed for a week, on average.