Stabilising foreign exchange rate will be a challenge: Finance minister

Stabilising the foreign exchange rate in the coming fiscal year will be challenging, said Finance Minister AHM Mustafa Kamal while presenting the national budget today. 

"In order to restructure the foreign exchange reserves and ensure the stability of the exchange rate, various restrictions have been imposed, including the imposition of a ban on the import of unnecessary and luxury goods, the setting of margins at different rates for opening letter of credits (LCs) depending on the nature of the imported goods. As a result, imports declined by 12.37% in the first nine months of the current fiscal year," the minister said during his budget speech on Thursday (1 June).

He addressed three major challenges for the next fiscal year - controlling inflation, improving the current account balance situation and stabilising the foreign exchange rate.

Despite challenges, he hoped that the forex reserve will improve in a short period of time. However, he did not give any clear roadmap for rebuilding the reserve.

Though, he blamed measures of import restrictions for declining GDP growth, in the new budget he hinted at the continuation of import restrictions.  

"It may be noted that the import growth in the first nine months of the fiscal year 2021-22 was 43.84," he said. 

"Due to the government's austerity measures and import control, the growth in the industry and service sector has decreased in the current fiscal year and as such the GDP growth will decline slightly to 6.03% compared to the previous fiscal year according to the provisional estimate released by the Bangladesh Bureau of Statistics (BBS)," Kamal said. 

"To rebuild the foreign exchange reserves, the current initiatives of verifying the accuracy of the price of imported items along with implementation, and monitoring of procedural requirements on LC opening, disposal and related issues shall continue in future. To encourage the use of formal channels in sending remittances, a 2.5% incentive is provided and remitter-friendly processes are being promoted including mobile financial services," the finance minister said. 

"All fees required for sending remittances through the Bangladeshi banks and exchange houses have been exempted. Thanks to these initiatives, our remittance income is on the increase," he added.

The export situation is returning to normal, AHM Mustafa Kamal said. 

"Concurrently, we are carrying out export promotional activities to augment our export income. Steps are being taken for the disbursement of foreign loans in the pipeline. Hopefully, the reserve situation will improve in a short period of time," he further said.