Cumulative Trade Overview Through October 2022
Cumulative Korea-Bangladesh trade for January–October 2022 reached $1,380M, representing only 4.2% year-on-year growth. Momentum steadily decelerated from the 11.5% expansion at the start of the year, leaving trade growth stuck in the single digits. As Bangladesh proceeded with IMF bailout negotiations in September and October, market uncertainty eased somewhat, but letter-of-credit (LC) restrictions remained firmly in place.
The year 2022 is recorded as the worst foreign exchange crisis year in Bangladesh's post-independence history. Russia's invasion of Ukraine sent energy and food import costs surging, causing foreign exchange reserves to fall by roughly $11B — from $45B at the start of the year to $34B by October. During this process, Bangladesh Bank imposed strict controls on the opening of import LCs, dealing a direct blow to Korean exports.
The 2022 Bangladesh FX Crisis: Causes and Course
The 2022 Bangladesh FX crisis was a compound crisis combining external shocks (the Ukraine war) with internal vulnerabilities (import-dependent structure). Bangladesh is heavily reliant on imports of energy (LNG, crude oil) and food (wheat, edible oils), making it extremely vulnerable to sharp rises in international commodity prices. Energy import costs in 2022 rose approximately 85% year-on-year, accelerating the drain on foreign exchange.
Internal factors — rising external debt from excessive infrastructure investment, state enterprise deficits, and foreign currency outflows through hundi (informal money transfer) channels — compounded reserve pressure. From June, Bangladesh Bank implemented emergency measures requiring a 100% LC margin on non-essential imports, directly hitting Korean exporters.
| Indicator | Early 2022 | June 2022 | October 2022 | Change |
|---|---|---|---|---|
| FX Reserves | $45.0B | $39.5B | $34.0B | −24.4% |
| Exchange Rate (BDT/$) | 85.7 | 93.5 | 110.0 | +28.4% |
| Inflation | 6.0% | 7.8% | 9.5% | +3.5%pt |
| Energy Import Costs | Baseline | +45% | +85% | +85% |
| LC Opening Margin | 20–30% | 75–100% | 100% | Sharply higher |
Impact of the IMF Bailout Negotiations
The IMF bailout negotiations that began in September had a stabilizing psychological effect on Bangladesh's foreign exchange market. As agreement on a $4.7B combined Extended Credit Facility (ECF) and Extended Fund Facility (EFF) program appeared imminent, exchange-rate volatility eased somewhat and the pace of reserve depletion moderated. However, IMF conditionalities — including phased reductions in energy subsidies, exchange-rate liberalization, and broadening the tax base — caused short-term inflationary pressures, keeping uncertainty in the trade environment ongoing.
January–October Monthly Export Trend Analysis
The monthly export data for 2022 reveals a stark contrast between the first half (January–May) and the second half (June–October). Starting from a strong opening, exports hit the year's low in August ($72M) when the FX crisis was at its worst, then partially rebounded in September on the back of IMF talks, before dipping again slightly in October.
| Month | Exports | MoM | YoY | Key Event |
|---|---|---|---|---|
| January | $98M | — | +12.1% | Pandemic recovery momentum |
| February | $100M | +$2M | +12.5% | Ukraine war erupts |
| March | $95M | −$5M | +10.3% | Commodity prices start surging |
| April | $92M | −$3M | +8.7% | LC margin hike under review |
| May | $88M | −$4M | +5.2% | Signs of LC restriction beginning |
| June | $83M | −$5M | −2.1% | LC controls tighten |
| July | $79M | −$4M | −5.3% | FX crisis intensifies |
| August | $72M | −$7M | −12.1% | Year low |
| September | $82M | +$10M | −3.5% | Stabilizes as IMF talks begin |
| October | $78M | −$4M | −6.2% | IMF agreement nears |
Annual Trade Structure Shift: Concentration in Essentials
Looking at the cumulative October export mix, a structural shift is evident: essential raw and intermediate materials gained share compared with the pre-crisis period, while non-essential items lost ground. The Bangladesh government prioritized LC approvals for the raw and intermediate materials (synthetic resins, fabrics) needed to sustain RMG exports, so those categories held up relatively well — but capital goods such as machinery and electronic components took a heavy hit.
ICT and Electronic Parts Export Shock: Digital Transformation Demand Weakens
ICT and electronic parts exports — which surged 45% in Q4 2021 and were driving trade diversification — were hit hard by the 2022 FX crisis. On a cumulative October basis, the electronic parts export share fell 2.6 percentage points from 9.1% to 6.5%, because Bangladesh Bank classified electronic and ICT equipment as non-essential imports and required a 100% LC margin.
However, this is closer to a temporary interruption than a structural decline. Bangladesh's government has not cut its digital transformation budget, and a strong rebound in pent-up ICT demand following IMF stabilization is widely expected. The 15% year-on-year increase in Bangladesh's ICT budget for 2023 supports this view.
| Period | Electronic Parts Exports | YoY | Notes |
|---|---|---|---|
| Jan–Feb | $18M | +11.2% | Growth continues |
| Mar–May | $39M | +5.8% | Slowdown begins |
| Jun–Aug | $18M | −28.3% | Direct impact of FX crisis |
| Sep–Oct | $13M | −18.5% | Partial recovery from IMF effect |
| Jan–Oct Cumulative | $88M | −8.9% | Share falls to 6.5% |