Impact of travel abroad on foreign-exchange reserve

FE Team | Published: November 22, 2023 20:51:06

Banks have become quite tight-fisted with dollar ever since the country's foreign-exchange reserve started plummeting following the energy crisis triggered by the Ukraine war. During the pandemic, there was hardly any demand for dollar from people looking for tours abroad. With the easing off travel restrictions worldwide in the middle of 2022, the demand for dollars for travel abroad started tentatively picking up. Now that the foreign-exchange reserve is depleting fast, the demand for the greenback has also soared. A report carried in the FE on Tuesday reveals that the forex reserve is under strain because of expenditure of dollar abroad by an ever increasing number of Bangladesh nationals visiting foreign lands. If banks are not particularly generous with issuance of dollars for travel purposes, the leeway left for payment by credit cards ---and in certain cases debit cards too---for goods and services abroad has encouraged foreign travel by people who can afford. This segment of society forced mostly to stay indoor by the Covid-19 for a couple of years now feels an overwhelming urge to take a trip.
Then, of course, people cannot help going abroad for medical treatment. It is impossible to restrain them when the more privileged go abroad for routine health check-ups. The last category of foreign travel is no less compulsive. This involves travel for higher studies abroad. Clearly, the reason behind the recent increasing foreign travels in most cases is strong. Not all of those are pleasure trips. Thus the average monthly outflow of cash dollars rose from US$8.6 million in the first six month to $14.50 million in the next four months of the current year. However, this figures looks puny compared to the monthly payment abroad by credit cards to the tune of $57.75 million and $68.50 million in the corresponding periods. It had to be so because of hardly any erosion of income for people better off in society. Also, this is the time when foreign universities open their admission starting usually from August every year.
Even those who go abroad for sight-seeing cannot be blamed for doing so. After all, this is a form of healthy recreation as well as a lesson from Nature. There are globe-trotters who by virtue of their courage, endurance, probing minds, wisdom and insight developed from their association with the unfamiliar and the unknown have enriched the inventory of human knowledge and also made the world a better place. They are mostly on budget trips unlike the official lavish tours which in many cases can be avoided. No wonder, the government discouraged such tours early but with little effect.
What, however, needs to be emphasised is that in time of this dollar crunch, people must shun avoidable travels abroad. Again, they should be prudent in spending money in foreign countries. After all, the Bangladesh Bank has to pay for such expenditures in greenback. So attempt has to be made from all levels ---from individual to official ---to limit such expenditures abroad to the barest minimum. The maximum annual quota of $12,000 for an individual's expenditure abroad raised twice from $5,000 may be downsized for the time being until there is a marked improvement in the central bank's reserve.