Faruque Hassan, Former president, BGMEA. Photo: Collected
Bangladesh's economy is facing significant challenges due to high inflation, declining exports, and a dollar crisis. The situation has been further exacerbated by recent conflicts related to the quota reform movement, which have led to widespread disruptions. The shutdown of the internet and imposition of curfews have paralysed a large portion of the economic sector, compounding the country's economic difficulties.
The violence surrounding the quota reform movement has had a severe impact on Bangladesh's economy. The closure of garment factories, shops, and port operations, coupled with nationwide internet shutdowns and curfews, has paralysed key economic activities. Economists warn that the repercussions of this unrest could surpass those of the COVID-19 pandemic. It's estimated that the instability is costing the economy approximately one billion dollars per day. This crisis is being viewed as a major economic shock for the country.
The recent surge in the dollar's price in Bangladesh is a significant concern. In the past two weeks, the exchange rate has risen from Tk 118-119 to Tk 124-125 per dollar. This increase follows a period where the dollar was priced at Tk 121-122. The rise in dollar prices is attributed to a reduction in the supply of dollars, which is linked to a drop in expatriate remittances and a decrease in foreign visitors. This shortage is contributing to the ongoing reserve crisis and exacerbating economic instability in the country.
Enamul Haque, Managing Director of Dhanmondi Royal Money Exchange, said, “The fixed rate of the bank is Tk 118. We sold one taka more at Tk 119. But in reality, the dollar does not exist now. We buy dollars from customers who come from outside. The current abnormal situation has reduced the supply of dollars.”
Meanwhile, the flow of expatriate income has come to a halt since July 16 due to the deteriorating law and order situation across the country centered on the quota reform movement and the imposition of curfews, internet shutdowns and bank closures for a few days. In July, remittances of $1.90 billion have arrived in the country. Remittances of $2.54 billion came in the previous month. Accordingly, remittances have decreased by $632 million or Tk 7,457 crore in one month.
On July 16, the quota reform movement intensified. On July19, the government imposed a curfew and deployed the army. As banking operations were virtually closed from July 19 to July 23, it was not possible to receive expatriate income through the banking channel. In the meantime, the campaign of not sending remittances started on social media. As a result, the flow of expatriate income through the banking channel has decreased, affecting the open market.
The dollar exchange rate was expected to remain market-oriented this year, economists said. But the current situation has exacerbated the crisis. As a result, inflation may increase further.
“One hope was to make the exchange rate market-based, the interest rate market-based,” Ahsan H Mansur, executive director of the Policy Research Institute (PRI), told The Daily Messenger.
“The exchange rate remained stable for two and a half months, between Tk 117-118. It was expected that inflation would come down in the next four-five months. But now we have a huge loss in the image. It has caused a loss of 10 billion dollars to the overall economy.”
The businessmen of the information technology sector said that even though all the businesses suffered losses due to the internet shutdown, the amount of losses in this sector was a little higher. Because the life line of the business of those involved in the software business is the Internet. Internet acts as a support line for other businesses. At the same time, the e-commerce sector does not run without the Internet.
In the last few years, Bangladesh has been able to gradually build a market and become a place of trust for foreign clients. Entrepreneurs in the information and communication technology sector feel that the mistrust created by the lack of internet to communicate with them and their clients may lead them to turn to alternative markets.
According to the data of Bangladesh Association of Software and Information Services (BASIS), an organization of businessmen in the information technology sector, more than five hundred crores of takas have been lost only when there is no internet connection. The entrepreneurs of this sector are in fear of further losses.
Basis president Rasel T Ahmed said, “Rather than daily losses, we are now thinking about permanent losses. Because clients have lost confidence. It is very difficult to gain their trust again. As an alternative to the market that has been created in Bangladesh in this sector, now foreign clients are turning to other countries.”
The ongoing ruckus has also pushed the garment industry towards disaster. When the curfew was imposed around the movement, the garment factories were also closed. This sector was also in crisis due to lack of internet connection. About 85 percent of Bangladesh's export earnings come from this sector.
Faruque Hassan, former president of Bangladesh Garments Manufacturers and Exporters Association (BGMEA), said, “Even though companies kept their production units open, business was virtually at a standstill due to lack of internet. Besides, the supply system has been severely disrupted. The shipment is frozen because the product could not be delivered on time. As a result, orders from some companies have been cancelled. Some companies are forced to send products by air.”
About 95 percent of the total import and export of the country is through Chittagong port. As the operation of this port has been closed for five consecutive days, there has been a lot of damage, concerned sources said. Due to stoppage of import activities and delivery of products, the sector has lost thousands of crores of takas in five days. Out of this only Chittagong Customs has lost revenue of Tk 900 crore.
Chairman of Chittagong Port Authority, Rear Admiral Mohammad Sohail told the media, “If delivery is stopped for one day, it affects the entire economy of Bangladesh. The port has also suffered because we have not received our revenue. Image, reputation are all damaged. It will hit the country's economy as a whole.”
When asked about the overall issue, Mustafa K Mujeri, executive director of the Institute for Inclusive Finance and Development, told The Daily Messenger, “The government's efforts to overcome the previous economic crisis have been weakened by this shock. This adverse effect is more likely to be prolonged. Inflation, production, etc., will cause more problems in every sector.”
Messenger/Disha
