All around stagnation for reducing imports

Zarif Mahmud: Imports are being strictly controlled due to the acute dollar crisis. At the same time, the price of the dollar is increasing. The import of industrial and commercial sector products including consumer goods has decreased due to the control over the last one and a half years.
Due to this, the prices of these products have increased in the market. A negative situation i.e. some sort of stagnation has emerged in almost all sectors. The pace of new industries has stagnated. The condition of import dependent industries is very fragile. It has also stalled the pace of new employment.
Many workers have become unemployed. As a result, people’s income has decreased. On the other hand, increasing the price of goods has increased the cost of people. Due to the impact of the dollar crisis, the lives of low- and middle-income people have suffered greatly.
According to the report of Bangladesh Bank, before the start of the Russia-Ukraine war on February 24 of last year, the price of the dollar was on average Tk 84.50. Now the dollar price has increased to Tk128. The price of the dollar increased by Tk 27 during the discussion period. But in most cases especially commercial importers are not getting dollar at this price. They have to buy dollars at higher prices. As a result, the cost of import is increasing and the price of the product is increasing.
Inflation rate is increasing. In October, this rate increased to around 10 percent. Inflation rate in this sector has exceeded 12 and a half percent due to increase in the price of food products.
To deal with the dollar crisis, the central bank-imposed import controls from April last year. Controls were tightened further in June. Opening of LCs without dollar resources stopped in August. As a result, LCs were being opened for exporters and essential goods. Opening of LCs for commercial import of goods has drastically reduced.
This has had a major negative impact on import-dependent industries. In addition to the increase in the prices of these products, the production of products is being hindered due to the shortage of raw materials in these industries. As a result, there has been a major crisis in these industries. Many industries are on the verge of closure due to shortage of raw materials. The workers working in them have also been fired.
According to the Central Bank report, both the import of goods and raw materials of the commercial industrial sector and the opening of LCs decreased in the last financial year. In July-September of the current financial year, the import in this sector has decreased by 14 percent, the import of raw materials in the industrial sector has decreased by 14 and a half percent. However, the rate of LC opening in this sector has increased slightly in recent times.
Small and medium industries in particular cannot import raw material products themselves. They procure raw materials from the wholesale market and manufacture. Commercial importers import industrial raw materials to meet the demand of this sector. But due to the dollar crisis, the import of this sector has been decreasing for the last one and a half years. These industries are in a big crisis.
The export industry has also been adversely affected by the global recession. Export earnings have been falling since last June. It last topped $5 billion in June. Since then, it has decreased to $3.76 billion last October. Raw materials for export industries are imported through back-to-back LCs. Along with imports in this sector, LCOs also decreased in the last financial year.
In July-September of the current financial year, back-to-back LCs of this sector decreased by 10 and a half percent, imports decreased by 29 percent. The effect of this will be less production of export products. As a result, exports will decrease. At the same time export income will decrease. There has already been a negative impact on the export sector. Added to this is the workers’ dissatisfaction with the demand for increased wages. Many factories have closed. This is also hindering production.
One of the inputs of industry is energy and electricity. Imports in this sector have also decreased. Electricity production has also decreased due to reduction in fuel oil import. In this industrial establishments are not getting uninterrupted electricity. As a result, production is hampered. At the same time, the import of gas is also low. In July-September of the current financial year, LC of energy products decreased by 12 and a half percent, import decreased by 20 percent.
It has a negative impact on the industry. At the same time, the import of coal, one of the fuel inputs, has increased, but LC openings have decreased. New LCs have been reduced due to non-payment of LC liabilities on previously imported coal. LC of coal decreased by 46.69 percent during the period under discussion. Imports increased by 119.45 percent.
Companies are now struggling to pay the additional import liability. Due to the dollar crisis, they are unable to pay their debts.
According to the central bank report, due to the dollar crisis, both the import and LC opening of basic raw materials of the industry decreased in July-September of the current fiscal year as well as the last fiscal year. Opening of LC will reduce the import of these products in the future. In the first 3 months of the current financial year, the LC of industrial raw materials has decreased by 22.5 percent. At the same time, imports decreased by about 37 percent.
The production of this sector is decreasing due to the decrease in the import of industrial raw materials. An economic recession reduces people’s incomes and increases the value of the dollar, as commodity prices rise unbridled, reducing people’s purchasing power. As a result, people have reduced their demand for food. As a result, sales of products have also decreased. It also reduces production.
Many companies import intermediate raw materials and use them to produce finished products and market them. The import of raw materials of this sector has also decreased. In the first 3 months of the current fiscal, LC opening of intermediate raw materials fell by 28 percent and imports by 16 percent.
In July-September of the current financial year, LC of crude edible oil decreased by 87.40 percent, imports decreased by 72.71 percent, among the basic raw materials of industry. However, due to the decrease in its price in the international market, the import has decreased. In addition, import has been curbed due to reduced demand and dollar crisis.
LC of raw material textile fabrics import of textile sector decreased by 20.21 percent and import decreased by 28.09 percent. LC of cotton import decreased by 2.97 percent, import decreased by 37.57 percent. LC of synthetic fiber imports decreased by 2 percent, imports decreased by 39.92 percent. That is, the import of all the materials of the textile sector has also seen a slowdown. It has also had a negative impact on the textile sector.
Many industries of chemical products have been established in the country. The products produced from them meet a part of the country’s demand and are also exported abroad. LC of raw materials of this sector has decreased by 48.23 percent. Imports decreased by 52 percent.
LC of import of raw material clinker and stone for construction sector cement production decreased by 47.86 percent. Imports decreased by 41.49 percent. At the same time, BP sheet import LC increased by 22.52 percent, import increased by 22.07 percent. However, its price is increasing in the international market and less products are being imported. Apart from this, there is a fear of money laundering from the country.
Along with existing industries, there has been a slowdown in the establishment of new industries. Due to the global recession and the dollar crisis, entrepreneurs are sitting on their hands. This is because they are not making new investments. This has reduced the flow of credit to the private sector. In July-September of the current financial year, the credit flow in this sector has increased by only 150 percent. Which is much less than the target.
Credit flows rose by more than 2 percent in the same period last fiscal. In July-August of the last financial year, the debt in this sector increased by more than Tk 11 thousand crore. In the same period of the current financial year, it has increased only less than one thousand crore rupees. However, credit flows grew less in dollar terms. Because the dollar increases the credit flow in this sector has decreased. A large portion of private sector credit is used for imports. That is why there is a dollar link with this loan.
The import of industrial machinery also decreased in the last financial year. In the first 3 months of the current financial year, the import LC of industrial machinery has decreased by 23.93 percent, while imports have decreased by 39.72 percent. As a result, there has been a negative situation in setting up new industries. Out of this, the LC of textile sector machinery has decreased by 51 percent, while imports have decreased by 64 percent.
LC of leather sector machinery is 81 percent, import has decreased by 85 percent. LC of machinery of jute sector decreased by 41.5 percent, import decreased by 67.5 percent. LC of garment sector is 17 percent, import has decreased by 31 and a half percent. 67 percent LC of pharmaceutical industry and imports decreased by 74 percent. LC of packing sector decreased by 75% and import by 44%. LC of industrial machinery of other sectors decreased by 20%, import decreased by 41%. Imports of machinery for various industries fell by 11 percent and imports by 36 percent.
Along with industry, imports of consumer goods also fell. LC of consumer goods fell by 48 percent and imports by 16 percent in July-September of the current financial year.