Power sector imports eat up 1/3 of remittance

Posted by BankInfo on Sat, Dec 15 2012 06:11 am

The central bank of Bangladesh projected the payment obligation in the dollar currency against imports in the power sector at $1.0 billion for the four-month period from November last, official sources said.

The payment obligation has been set against import of capital machinery, and petroleum oil and the purchase of electricity from rental power plants, which are joint ventures with foreign companies.

Experts fear a negative impact of it on the dollar rate in the local money market, if such big payments coincide with other payments in the greenback.

The government has to pay $1.014 billion for a period of four months, as is projected by the import monitoring section of Bangladesh Bank's (BB) Foreign Exchange Policy Department (FEPD).

The expected payment obligation for the months of November, December, January and February is as follows: $ 124.18 million for importing capital machinery, $ 743.31 million for importing petroleum oil and $ 147.12 million for purchasing electricity from rental power plants run on joint venture with foreign companies, according to the BB statistics.

The annual import costs in the power sector are equivalent to about one-third of the hard-earned remittances expatriate Bangladeshis send home, official sources said.

The total remittance inflows stood at $12.85 billion in the last financial year (2011-12) against $11.65 billion received in the 2010-2011 fiscal year. But a large portion of it or about one-third was spent on imports in the power sector, especially for the rental power plants, they also said.

The government needs more or less $ 5 billion a year against the payment obligation for imports in the power sector to generate electricity, a BB official said.

But the power supply in the country did not improve to any significant level, though the government raised power tariff several times in the country.

A former BB official said the higher payment obligation or import payments might push up the demand for dollar widening its gap with the greenback's supply and thus it might raise the dollar price in the local money market.

News: The Daily Financial Express/Bangladesh/15th-Dec-12