‘Illicit financial flows must stop’

Illegal money outflows have to be stopped in order to tackle the current economic turmoil in Bangladesh, said a top industrialist.

It is taking place mainly through hundi, an informal arrangement of money transfers being used to send remittances by Bangladeshi migrant workers.

"Because of hundi, an expected level of remittances is not coming to the country. Rather, they are being diverted to other countries such as safe homes," said Mostafa Kamal, chairman and managing director of Meghna Group of Industries (MGI), one of the leading business houses in Bangladesh.

Operating in diversified areas from essential commodities to private economic zones, MGI runs more than 54 industrial units, has employed about 50,000 people, and has an annual turnover of approximately $3 billion.

According to Kamal, families of migrant workers are given money in the local currency when funds are remitted through hundi operators. "This is fueling inflation."

Besides, a section of people is borrowing a considerable amount of money from the financial sector and defaulting on their payments. Many are sending the money abroad.

"Non-payments of public money and siphoning off the funds are doing a lot of harm to the economy," the industrialist said.

His views come as the country's foreign exchange reserves have kept falling since external payments continue to be higher than the inflows, mainly through exports and remittances.

Bangladesh which had $33.4 billion in forex reserves at the end of 2021-22 saw it plummet to $21.05 billion on October 5, data from the central bank showed. It was about $40.7 billion in August 2021.

Remittances hit a 41-month low in September even though a record number of people went abroad for jobs in 2022-23. Export growth has also slowed.

"We hear that even our exporters are bringing back export proceeds slowly in anticipation of further appreciation of the dollar against the taka. Besides many people feel shaky ahead of the election."

So, policymakers and authorities should take the issue of illegal money outflows seriously and take action accordingly, Kamal said.

The businessman cited that authorities in Pakistan have already taken measures. And even Singapore, a compliant country, has initiated action against money launderers.

Last week, the Island nation said it seized assets of $2 billion in money laundering cases.

"Our main problem is money laundering. It has to be stopped," Kamal said.

Kamal began business by importing commodities initially before starting to set up industries in 1989.

He says the rating downgrade of Bangladesh by international rating agencies has created problems for local businesses when it comes to opening letters of credit (LCs) and ensuring their confirmation by financial institutions abroad.

"International lenders are not showing any interest in confirming LCs. And when they confirm LCs, they are taking higher charges."

The 68-year-old says Bangladesh has not faced so much pressure all at once as it is currently doing now.

The MGI chairman said overall consumption has declined owing to elevated inflation. So, fixed-income people are having a tough time.

Prices of commodities have declined globally. However, consumers in Bangladesh are not getting the benefit because of the depreciation of the taka by 28 percent in the last one and a half years, said Kamal.

He urged the government to bring down import tariffs on essential commodities such as sugar.

The entrepreneur says the government's regulatory agencies and service providers are hiking fees, particularly for the renewal of licences. "It seems that they are increasing rates by competing with each other."

Kamal thinks the pressure on the economy would be temporary.

"And Bangladesh will be able to fight the crisis if authorities take proper measures, including against money launderers."

"We need to focus on how we can accelerate exports and diversify and expand the export basket to increase the foreign currency inflow. We all have to work collectively for this. There is no other alternative."