This summer’s political unrest in Bangladesh ultimately toppled the government. The associated business disruptions – which included a liquidity crash and dollar crisis as well as an internet blackout that crippled communications – raised fears among the country’s CFOs that the large export-dependent garment sector could suffer a similar fate.
An interim government is now in place, led by microfinance pioneer Muhammad Yunus, which aims to organise new parliamentary elections, now expected next year. While internet services have been fully restored, dollar shortages and illiquidity remain, hampering letter-of-credit transactions and delaying exports and export payments.
‘Many of our clients who were preparing for audits are now reconsidering their plans’
Communication collapse
The government-imposed internet blackout in July led to a general breakdown in businesses’ ability to communicate with clients, with some even forced to delay their financial reporting as a result.
‘There are companies accredited with foreign accountancy firms that use internal software, allowing them to update information without interruption, but for people like us, who work in the field, moving from office to office and client to client, it was impossible to get any work done,’ says Kamrul Ahsan, assistant general manager of finance and accounts at Dhaka-based Ha-Meem Group, one of the largest conglomerates in Bangladesh’s textile and garments sector.
He adds: ‘Many of our clients who were preparing for audits are now reconsidering their plans due to the formation of the new government. They’re observing the situation closely. As accounting officers, we provide essential audit services, and this uncertainty has disrupted our work.’
‘Everything stopped’
Accountancy firms, too, were badly affected. ‘Most of our clients are abroad, as is a large part of our internal management team, so we had to go through a rough period during the internet blackout in terms of our office work and communication,’ says Kowsar Ahmed, a Dhaka-based senior associate accountant working in practice.
‘Our WhatsApp group and email communication stopped. Our head office was continuously trying to communicate with us. Everything stopped. For our existing clients, where we handle services like monthly compliance that depend on the regular operations of local tax offices, we couldn’t provide any service at all.’
Mamun Rashid, chairman of Bangladesh consultancy Financial Excellence, says cash management has been the primary focus of the country’s apparel and textile sector CFOs during and since the disruption. He adds that the country’s banks are still grappling with liquidity and dollar shortages that have made paying out on letters of credit (which the sector’s businesses use to purchase goods locally to meet an export order) such a problem. Bangladesh’s businesses, he says, are still managing ‘massive orders and business potential, but they struggle to secure loans and ensure timely payment for sold products’.
Governance issues
Iftekharul Bhuiyan FCCA, finance director of Nitex, a B2B platform for apparel brands and manufacturers, warns that the next few months could be tough. Foreign investors are assessing the interim government’s roadmap and the prospects for democratic governance. Their investment strategies will be shaped by their conclusions, he says, with job losses inevitable if they pull out of the country or decide against investing.
‘Financial institutions are now focused on how to restructure and stabilise the economic system’
While the political situation has stabilised, the economy remains volatile, with doubts raised about the data on GDP growth, export earnings and foreign exchange reserves provided under the previous regime. ‘Financial institutions, including the central bank, the National Board of Revenue and other regulatory bodies, are now focused on how to restructure and stabilise the economic system.’
Husne Ara Shikha, executive director and spokesperson at Bangladesh Bank, the central bank, says that some reforms introduced by the new government have already started to pay off. ‘We have stabilised our foreign exchange rate with the implementation of a crawling peg policy,’ she says. ‘Currently the gap [in foreign exchange rate] between the open market and banking transactions has narrowed, a target we have been striving to achieve for a long time.’ The central bank also raised its policy interest rate to 9.5%: ‘The government may further raise it to 10% to combat inflation,’ Shikha adds. ‘We expect to see a noticeable improvement in the next five to six months.’
Challenges overcome
Shikha says that the financial sector has overcome challenges caused by the internet blackout, and that its professionals ‘welcomed the recent policy changes, particularly because they now have a stable market for the foreign exchange rate’. This has led to a significant increase in remittances, she says, boosting the availability of foreign currency. ‘As a result, banks are slowly overcoming the dollar crisis,’ she adds.
‘Accountants play a crucial role in ensuring accountability and building trust’
Meanwhile, Prawma Khan FCCA, ACCA Bangladesh’s country manager, says the interim government’s focus on stabilising the economic environment will likely lead to increased scrutiny on financial disclosures and governance.
‘Accountants play a crucial role in ensuring accountability and building trust within both public and private sectors,’ she says. ‘ACCA Bangladesh emphasises that the profession must not only adapt to regulatory changes but also continue prioritising ethical standards, which are foundational to the credibility of the financial ecosystem.’
Khan adds that Bangladesh has strengthened its reputation as a trusted partner for finance and accounting services outsourcing for many countries such as the UK, Australia and throughout Europe. But during the internet blackout, these services were heavily impacted.
‘You need to have trust in a country’s economic, social and governance framework in order to do business’
A question of trust
‘While speaking to many members of the professional accountancy bodies in Bangladesh, it was clear that they lost a large part of business to neighbouring countries which impacted them in many ways. You need to have trust in a country’s economic, social and governance framework in order to do business. Our professional accountants working in advisory services have taken a hit due to the law-and-order situation.’
‘Many accounting professionals in Bangladesh have suffered in numerous ways. Although we can’t quantify the exact impact, it’s undoubtedly significant,’ says Mahbub Ahmed Siddique, COO of the Institute of Chartered Accountants of Bangladesh.
‘With the broader scope for transparency now available, if the accounting community stays aware and committed to integrity, it can benefit the country. Establishing good governance within the accounting profession will lead to a better future in the short term and the long.’
