Imports show an incremental fall under belt-tightening recipe the government has adopted amid dollar dearth, with the July-August turnover recording an 18-percent contraction.
Economists and businesspeople say lower-than-necessary imports have downstream economic implications, as the supply chains get into volatility for want of adequate supplies.
The overall import trade in terms of opening letters of credit dipped to US$ 10.5 billion, down 18.14 per cent during the first two months of the current fiscal year, 2023-24, over its corresponding period a year before, data compiled by Bangladesh Bank showed.
Supplies of consumer goods like cereals, edible oils and so took a knock as the import category dropped by 39.25 per cent to $926.11 million year on year in July-August 2023, according to the data.
The import of capital machinery also plunged by nearly 22 per cent to US$388.8 million, with its implications on production chain.
And the import of intermediate goods — again a necessity for industrial production — dropped nearly 20 per cent to $ 798.7 million during the period under review.
Another squeeze on economic activity come from fuel front — petroleum imports registered a fall by 22.33 per cent to $1.53 billion over the corresponding period.
And industrial raw-material imports declined by 27.64 per cent to approximately $3.3 billion during this past July-August period.
A saving grace is seen only in ‘others’ category, with an increase in imports by 7.75 per cent to $3.6 billion.
Bangladesh mainly makes cash import, accounting for around 60 per cent of the turnover. Import on buyer’s credit, loans and grants as well as IDB loans also takes place.
Economists and manufacturers find two main reasons behind the sharp fall in imports: persisting higher inflation which adversely affects demand for goods on the domestic market and dollar shortages as the banks are unwilling to open LCs.
Dr Ahsan H Mansur, executive director of the Policy Research Institute of Bangladesh (PRI), blames dollar shortage for the downturn in capital-machinery imports.
“There is also uncertainty in both export and domestic markets. Generally, sales are down,” he told The Financial Express.
“The implication of this is that the productive capacity of the economy will not increase and job creation will be low.”
“To my mind, the dollar-market volatility is the key reason as many banks are not willing to open LCs against imports,” says Dr M Masrur Reaz, chairman of the Policy Exchange of Bangladesh.
On a point of prudence, he sees such a continuous fall in imports as good when the balance of payments is considered. But “ultimately it will impact employment and growth.”
He notes that the global commodity market is favourable as the prices there have eased. “We fail to import because of dollar.”
Interbank dollar-taka exchange rate is now Tk 110 or up by nearly 7.0 per cent in a year since September 2022, according to dealers’-body BAFEDA.
Anwar-Ul Alam Chowdhury Pervez, managing director of a leading textile corporate — Evince Group — told the FE that the main reason for drop in the imports is dollar crisis.
“Banks are not showing interest in LC opening.”
Mr Chowdhury says many exporters have been failing to import industrial raw materials. “Now, persisting higher inflation has affected the buying power of consumers which is also another reason behind the sharp fall.”
Inflation has continuously outpaced the target, hitting nearly 10 per cent in August last, amid quirky price rises on an intractable market that tends to take least care of official interventions.
jasimharoon@yahoo.com
News Source : thefinancialexpress
