Taka has gained nearly five per cent against the US dollar over the past six months as import of products except fuel oil fell and foreign remittance rose. The foreign currency reserve touched $10.70 billion mark on Thursday as the 2012-13 fiscal kicked off with a downtrend of opening of import LCs (letter of credit) while around $1.2 billion came in as remittance in July.

The current foreign reserve can meet up import costs for more than four months, officials at the central bank said. The reserve dropped below $10 billion mark around a month ago as the government had to pay import costs to the Asian Clearing Union.

The officials said the local currency in gaining on the greenback thanks to the 'satisfactory' inflow of dollar through remittance.

On Thursday, the value of US dollar in the inter-bank currency market was Tk 81.60 which was Tk 0.10 less than the previous day. The price of dollar had climbed nearly to Tk 85 last January.

The central bank bought nearly $ 500 million from the market to offset its impacts on export income and remittance flow, but failed to arrest the slide of dollar.

Officials say Bangladesh Bank is purchasing dollar out of the fear that expatriates will remit less if the dollar slides.

Bangladesh Bank Governor Atiur Rahman said bumper production over past several seasons meant Bangladesh did not have to import rice.

Moreover, he said, the central bank clamped massive restrictions to discourage import of unnecessary and luxurious products. "The import cost dropped for this reason," Atiur explained.

Economist Zaid Bakht, however, called for caution to see to it that capital machinery imports, needed for setting up industries, did not suffer. According to the central bank's import related information on the first two weeks of July, first month of 2012-13 fiscal, LCs worth nearly $1.158 billion were opened for import.

The amount is 58 per cent less than it was in the same time in the previous year.
The clearance procedure has also reduced by nearly 60 per cent in the first 14 days of July.

The import cost came down significantly by the end of the previous fiscal, according to Bangladesh Bank, as the amount of LCs opened for importing products stood at nearly $36.92 billion which was 4.27 per cent less in 2011-12 fiscal.

In total, $32.94 billion worth of goods were imported during the 11 months (July-May) of the last fiscal year, 7.16
per cent more than the previous year, according to the central bank.

The import bill had inflated by 42.76 per cent in the first 11 months of 2010-11 fiscal.
Expatriates, however, had sent remittances worth $12.85 billion in the past financial year, a 10.26 per cent growth over the previous fiscal while export earnings stood at $24.28 billion with a growth of 5.93 per cent.
The import sector saw increase only in fuel import, greatly reducing import cost in the last fiscal while the amount of LCs for fuel import increased by 47.35 per cent.

The amount of LCs opened for importing rice and wheat decreased by 66.34 per cent in the July-May period of the fiscal gone by.

LCs for capital machinery fell 21.52 per cent, import for industrial raw materials was down six per cent and import of the other goods decreased by 5.26 per cent.

Governor Atiur Rahman said the economy was getting back on its feet: "Economy is getting stable following decrease in import cost.

The key indices are positive, remittance is increasing and revenue collection rate is very good. I hope the reserve will be over $10 billion," he told bdnews24.com.
He also hoped the economy will be in 'even better shape" in the future.

Zaid Bakht, also Research Director at the Bangladesh Institute of Development Studies (BIDS), told bdnews24.com: "The overall decrease in import cost is fine. But if import of capital machinery, needed for setting up industries, is reduced, there will be a negative impact on the economy." "It will impact the industries sector negatively and may not let the government reach its goal of 7.2  per cent GDP in this fiscal year," he warned.

The Daily Independent/Bangladesh/ 4th Aug 2012