$14b export data puzzle is unnerving
You can lie with data or illuminate the truth with data. And there's something in between -- half-truths.
A $14 billion correction in export figures by the central bank is necessary because it addresses one economic half-truth.
But half-truths are unnerving.
The data revision that came on Wednesday through a regular update on the balance of payments raises disturbing questions about the country's economic performance and the policy that revolved around it.
The shocking revelation has sent economists scrambling for answers, but there are more questions than answers as the authorities are almost silent.
What's clear is that the discrepancy in export figures again underscores the importance of accurate macroeconomic data. A lack of statistical accuracy can upend many indicators. The calculation of gross domestic product is one of them.
Such a big discrepancy is "unbelievable", said MK Mujeri, an economist and former director general of the Bangladesh Institute of Development Studies.
Export and import data calculation is a simple task, but big mistakes such as this by officials raise questions over the authenticity of other components of the economy. "Entire GDP estimates should be revisited," said Mujeri.
His stance concurs with the views expressed by other economists.
"If the ratio of this discrepancy has significantly increased over time, then that should necessitate revisiting the growth estimates," said Ashikur Rahman, principal economist at the Policy Research Institute of Bangladesh.
With the disclosure, some other issues came to a head as well.
The statistical revision suggests that Bangladesh Bank and the finance ministry have finally accepted that no significant export earnings are retained abroad as exporters have claimed for years. That means the trade deficit is much larger than originally presumed. That also indicates that the target of reaching $110 billion in exports by 2027 is far from realistic.
"In other words, we should now formulate a more realistic export strategy and identify what exact constraints are hindering our export performance," Ashikur said.
The difference between export figures calculated by the Export Promotion Bureau and Bangladesh Bank persisted for at least 12 years, with the gap crossing $12 billion in fiscal 2022-23.
Economists have long been referring to the puzzle. Finally, the central bank woke up and reconciled the mismatch for the July-April period of fiscal 2023-24. As a result, exports fell 6.8 percent during this period, a sharp contrast with a 3.93 percent growth shown in the EPB's figures released earlier.
What's more, Bangladesh runs the risk of reputational damage abroad. The country's image as a garment powerhouse defined by the sheer volume of shipments will be seriously dented. Clothing exports, which make up about 10 percent of the economy, are an important indicator that sets the country apart from its peers.
SOME ESTIMATES ARE OBSOLETE NOW
It is going to create serious data chaos. Whatever Bangladesh has estimated in the past has now become "mostly irrelevant", said Fahmida Khatun, executive director of the Centre for Policy Dialogue.
The EPB publishes figures based on the data from the customs department. Apparently, for procedural reasons or otherwise, the customs department took into account the same export data more than once in many cases, known as double or triple counting.
As per the EPB data, exports were $47.47 billion in the July-April period of fiscal 2023-24. However, the amount stood at $33.67 billion after the correction, according to data released by the central bank on Wednesday.
But it's not clear for how long such wrong data entry has been going on.
Good policy framing depends on authentic data. Poor quality data gives wrong signals to the policymakers.
"
If policymaking is done based on unreliable data, then policies become irrelevant and defunct," Fahmida said. Unfortunately, citizens have been misled about the real economic situation due to such anomalies perpetuated by government organisations, she said.
These errors show the extent of data governance or a lack of it in Bangladesh. Without quality information, informed policy-making is difficult, said MA Razzaque, chairman of the Research and Policy Integration for Development.
The export data mismatch will have an impact on GDP estimates because value addition from exports is included in the GDP calculation. The ratio of value addition is nearly 60 percent. So, the GDP impact will be as much as $6 billion, Razzaque said.
Md Deen Islam, associate professor of economics at Dhaka University, said this correction would lower the GDP growth rate, with exports contributing less to overall economic output, GDP growth rates for the period will need to be revised downward, and future projections for economic growth will need to be adjusted to reflect the more accurate export figures, potentially leading to more conservative growth estimates.
The significant revision could create temporary confusion and mistrust among stakeholders, including businesses, investors and international partners, he said.
"Revisions might lead to questions regarding the credibility and reliability of economic data published by national agencies," he added.
Deen Islam said policymakers may need to reassess their strategies to stimulate economic growth and stabilise the macroeconomic environment as the revised export figures indicate a significant decline.
However, the reconciliation of export data provides a more accurate picture of Bangladesh's economic landscape, which is crucial for effective policy-making and strategic planning, said Deen Islam.
Birupaksha Paul, a professor of economics at the State University of New York, said it was a positive move toward a proper accounting of the balance of payments.
A senior official of the EPB said it does not produce export data. The agency compiles export data based on numbers it receives from the customs wing of the National Board of Revenue and the central bank.
"We only see export data once the goods are shipped. If any consignment is returned, the EPB does not have the chance to find that out," he said, adding that it is monitored by the BB and NBR.
"Still, if we need to correct any data, we will do it," said the official. There is a committee comprising representatives from the EPB, the BB, the NBR and other agencies.
The EPB is yet to release data for the July-June period of FY24 although it usually publishes the figures early every month.
Saiful Islam, executive director of Bangladesh Bank, said from now on, the central bank will base the calculation on the corrected export data.
Asked about the previous mismatch in data between the BB and the EPB, he said there was no problem with the past data. There was a problem with the method of reporting. He did not elaborate.
Despite the big reset, the economy's health remains unchanged. The correction addresses anomalies but does not fundamentally alter the economic landscape.
How did EPB’s export data vary so much from Bangladesh Bank’s?
Exporters dismayed by massive discrepancy in govt's export data, concerned about such high export data when their own experience was telling them otherwise
Publish : 04 Jul 2024, 09:21 PMUpdate : 04 Jul 2024, 10:02 PM
Exporters in Bangladesh said mismatch between Export Promotion Bureau (EPB) and Bangladesh Bank’s (BB) export data was the result of hiding the true numbers by inflating export earnings.
Once the central bank used the International Monetary Fund (IMF)'s BPM-6 approach and made this data available, many began to notice the discrepancy between this data and EPB’s.
Exporters said as the Export Promotion Bureau (EPB) is responsible for publishing export data, the institution should have been more cautious and transparent in publishing the numbers as overstated data ultimately impacted them.
Industry insiders also said that along with the EPB's exaggerated data, the invisible balance was not submitted to Bangladesh Bank, hence unnecessarily drawing allegations like money laundering.
They had been expressing concern over EPB's export data, saying that it did not accurately represent the volume of trade they were seeing.
Behind this mismatch
On Wednesday, officials of the central bank said the EPB publishes figures based on the data from the customs department. Due to procedural reasons, the customs department took into account the same export data more than once in many cases, which is known as double or triple counting.
They said that even when shipments were rejected by the customs, they were still considered while preparing the export data. As a result, the EPB data showed higher exports than the actual sales in the global markets by local exporters. The gap has been adjusted as per the recommendation of the IMF's $4.7 billion loan program.
A major discrepancy was found in the export data published by EPB and as a result, the National Board of Revenue (NBR), Bangladesh Bank and EPB jointly decided that the data by NBR will be considered as the final data in the case of exports earnings.
However, due to this decision, the export earnings of the country decreased significantly, which was shown as inflated in the EPB data.
According to the Balance of Payment data published by the central bank on Wednesday, the export earnings of Bangladesh in July-April period of FY24 stood at $33.67 billion, a decline of 6.8% from $36.14 billion from the same period in FY23.
According to the EPB data of July-April period of FY24, the merchandise export earnings of the country was $47.47 billion, which was 3.93% higher than $45.68 billion.
This indicates a major discrepancy in the export earnings of the country, meaning the EPB may have declared surplus export earnings amounting to $13.8 billion.
The readymade garment (RMG) sector, which makes up the lion’s share of Bangladesh’s export sector, earned $29.68 billion in July-April of FY24, which is 6.7% lower year-on-year, said the corrected export data.
However, the EPB declared that the sector earned $40.49 billion with a 4.97% year-on-year growth.
Industry insiders said that although the EPB collects preliminary data from the National Board of Revenue (NBR), the central bank has just started gathering data using the BPM-6 approach as per the prescriptions of the IMF.
What exporters say
Exporters said that they had been saying this for a very long time, that EPB data was fabricated. But their views were not taken into account. Finally, the real facts have been revealed, they also said. Mohammad Hatem, executive president of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), said that he has been talking about this since 2022.
“
In November of 2022, exports crossed $5.13 billion, then the highest export in a single month in the history of the country. But we did not export so much then. I didn't know how export increased to such heights,” he also said.
Then, exports were shown at the $5 billion mark for several months which was incorrect. He went on saying that the data proved that exporters were not in a good condition now.
He also said that the EPB misguided the government, businesses, the nation, as well as the international community by providing misinformation. Those behind such fabricated data must be punished.
Talking to Dhaka Tribune, Md Nasir Khan, vice-president of the Leathergoods and Footwear Manufacturers and Exporters Association of Bangladesh (LFMEAB), said that the monthly EPB data just shocked them.
“The condition of industries was shaky, while production declined regularly. But we didn’t know how exports kept increasing each month,” he added.
He also said that this misinformation affected the industry and its stakeholders.
Such an erroneous show of inflated export data by a responsible organization is unexpected and frustrating, he added..
Mohiuddin Rubel, director of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), told Dhaka Tribune that the fabricated export data concealed the real situation of the industry.
“As the actual situation was concealed, it prevented us from planning for the future. If we know the actual situation, we can bargain with buyers, can prepare for a future groundwork, entrepreneurs wouldn’t expand the industries and the new entrepreneurs wouldn’t invest,” he added.
Now the industry in a “zero” position, he went on saying that as per government rules, they are dependent on EPB for data, but if they provide fabricated and exaggerated data, then it is unexpected and ultimately hinder the industry.
The industry insiders also said that for a long period, there was more than a $10 billion gap between the export data provided by the EPB and the central bank, and based on the EPB data, various parties have been blaming them of laundering money under the guise of exports.
Ahsan H Mansur, executive director of the Policy Research Institute (PRI) said the export data has been miscalculated and it should have been fixed earlier.
“The revision in the BoP is the result of this change in accounting methodology. Now, it's clear how well our exporters are doing. But due to this, the financial account turned positive but the current account went negative again. So, it is not good news for us,” he added, saying that although there are some positive signs in the economy, it will take some time to bring down inflationary pressure.
EPB unwilling to take the blame
However, it was not possible to get an official statement from any official of EPB in this regard.
This reporter was unable to reach EPB Vice-Chairman Anwar Hossain despite repeated attempts.
Contacted, EPB Secretary Bibek Sarkar said the matter was beyond his jurisdiction, and asked to contact Abu Mukhles Alamgir Hossain, director of policy and planning, but he was also unavailable despite multiple calls.
Md Akhtaruzzaman, deputy director of the policy and planning wing, said: "Contact the director. I am busy with other work,” before hanging up.
However, an official of EPB, requesting anonymity, said that they collect data from the NBR as well. It is provisional data and they mention this in their monthly export data reports.
“I cannot tell you something more as it is beyond my jurisdiction. However, discussions are going on among us at the office and we will be able to provide an official statement soon,” he added.