For the past few years, exporters have been complaining that the monthly export numbers released by the Export Promotion Bureau (EPB) are out of touch with reality.
Published export figures showed an upward curve almost every month, while apparel exporters were reporting declines in sales orders from inflation-hit US and Europe – their main markets. But their voices were buried under the joyous noises made by the EPB. The exporters were rather blamed, directly or indirectly by officials and economists that they were not bringing export proceeds home fully. The gap between the EPB’s export data and the amount Bangladesh Bank collected from banks widened alarmingly – from $8.4 billion in FY22 to $12.2 billion in July-March of the just-ended FY24 – raising eyebrows of all.
Even the IMF, while keeping a constant eye on Bangladesh’s financial sector as part of their $4.7 billion loan package, questioned the gap and wanted answers.
Now the truth has surfaced. But the striking casualness of the figure correction makes it look like a Grade 1 student erasing an error and writing the correct digit in his homework. It was a huge number – $9.93 billion, one-fourth of the export money earned in the nine months to March of the just-out fiscal year.
The Bangladesh Bank, as part of its routine monthly release of balance of payments data, just “corrected” the digits to $30.95 billion from $40.88 billion from the previous month’s release. No explanation, no trace of data correction was evident in the new release. But it leads to a cascading change in all BoP numbers, some turning on their heads. The Bangladesh Bank adjusted all the figures accordingly, as if it was nothing. Trade deficit jumped by $10 billion in July-March, the financial account overnight turned surplus and the current account slipped in the red from surplus. And the changes were duly reflected in July-April data.
A brief note beneath the data table provides a clue explaining the drastic changes. “The NBR revises and provides the export shipment data to Bangladesh Bank and EPB by adjusting multiple entries. Bangladesh Bank compiles the export data (f.o.b) based on local sale, CMT (cutting, making and trimming), etc as per BPM6.”
Playing with invalid data
The Bangladesh Bank, whether it owes any further explanation or not, now stands “corrected”. It cleaned its data off the garbage to make its book look clean as per internationally accepted method, which has long been pressed by the IMF, but ignored until Bangladesh approached the global lender for budget support to help it out of the persisting dollar crisis.
But at what cost? These are the numbers that are indicative of the financial health of a country, providing the basis of all major macroeconomic calculations, all trade and economic transactions of the country with the rest of the world.
If these data are corrected now, it is no secret that all previous data were incorrect, meaning that all external sector projections in terms of share of GDP have now turned invalid. Economist Ahsan H Mansur said the massive data reshuffle would have major consequences on at least two indicators – export-to-GDP and debt-to-GDP ratio servicing calculations.
The reliability of official economic data has always been in question. Now it gets official acknowledgement with the Bangladesh Bank recalculating its numbers citing data revisions by two other vital bodies– the National Board of Revenue and the EPB.
Do they owe the nation any explanation? It is the customs that inspect export shipments and compile data; they are the people with whom the traders must “negotiate” to get their consignments cleared. They should have known how some exports, especially those from EPZs, are double counted, inflating the overall figure. To whom are they accountable
EPB owes exporters an apology
The EPB, which is in a hurry in the first week of every month to disclose export data, often rewriting monthly export earnings and taking exporters by surprise, needs to explain where they get the numbers from and how they compile those. The export promotion agency owes exporters an unconditional apology as its inflated figures wrongly made exporters look suspect that export earnings worth over $12 billion have not been repatriated at a time when the country is facing a serious shortage of dollars.
Knitwear exporter and former president of BKMEA Fazlul Hoque said, “What we have been saying for long has been proven true now. This is the real export scenario that everybody needs to know.”
“We are struggling with decline in export orders, gas crisis, wage growth. But official data were showing 10%-15% export growth,” he said, stating how inflated data were making wrong perceptions about exporters and painting a false sanguine picture of export growth, resulting in an abrupt withdrawal of export incentives.
Now that the real picture is known, policymakers should rethink the measures they are taking and act prudently, he suggested.
Is the UD reliable?
The issue of UD (utilisation declaration) will also come to the forefront now. This is an instrument export sectors use for duty-free import of raw materials and availing GSP, cash incentives and other benefits. Export associations such as the BGMEA and the BKMEA are authorised to issue UDs to their members who enjoy bonded warehouse facilities to store raw materials imported without paying duty. The data shows numbers of UDs issued by the BGMEA during October-December quarter of FY24 were higher than the same period of the previous year, indicating export growth. This does not match with their claims of falling orders nor with the adjusted central data showing exports posted a negative growth of 6.8% in the July-April period of FY24, dropping to $33.6 billion from $36.13 billion in a year-ago period.
If this is so, then why did the UD issuance surge? Does it point to a leakage of fabric – imported duty-free only for export purposes – from bonded warehouses, whose misuse is often alleged and proved in the raids of customs intelligence? It will also put to test the claims of rising local value addition in the apparel sector which spends a large slice of export incomes in import of raw materials and machinery.
Data must be pure
Given the practice of government agencies coming up with widely-varying and questionable data, one such revelation can be cited as a right move. Errors need to be corrected, the sooner the better. The Bangladesh Bank did it, and others should follow. BPM6 appears to be a magic acronym in Bangladesh’s financial sector, resetting data compilation and reporting. The Bangladesh Bank now reports gross foreign reserves as per the Balance of Payments and International Investment Position Manual (BPM6), though it still stops short of disclosing net usable reserves. Now it recalculated BoP numbers in the same manual. It is pledge-bound to improve calculations of bad loans as per IMF guidelines to reveal the real health of the banking sector.
While a dearth of data is already there, whatever data is released, their credibility remains in question and is often contested by independent economists. Sometimes a government agency contests data of another official agency, as happened in recent months with the BIDS claiming food inflation would be much higher than what the BBS reported.
If the central bank’s data correction is part of a broad-based cleansing drive, one can hope it will help build data sanctity, the lack of which frustrates local researchers, discourages foreign investors and misguides policymakers.
TBS
