Dollar crisis poses allnegative growth

Zarif Mahmud: Due to the dollar crisis in the country, a negative situation has been created in all sectors of industry and trade. During this period, the import of fuel oil, gas and coal decreased. It has caused a crisis in power generation. The crisis has become more pronounced in recent times. As a result, on the one hand, extreme suffering has increased in public life.
On the other hand, the pace of setting up of new industries, industrial production, agricultural production, supply of commercial goods and employment has slowed down. In this situation, the price of the product has increased. As a result, import control has become a ‘conch saw’. Imports have been controlled to control inflation but continued for a long time, but now the rate of inflation has increased. This has started a new crisis in the overall economy of the country.
According to sources, there was a slowdown in the banking sector, investment and employment before Corona. At the beginning of 2020, the economic crisis became evident when the corona infection overtook the whole world. Most of the economic activities came to a standstill. In that year, various anti-corona materials were imported more, but LC opening of total import decreased by 10 percent. After the decline of corona infection, the demand suddenly increased in FY 2020-21, on the other hand, there was a shortage of supply.
This increases the price of the product. As a result, the import LC increased by 20 percent in terms of money in that financial year, but it decreased quantitatively. Russia invaded Ukraine in February 2021-22 fiscal year before it recovered from the corona virus. This further hampers the supply of goods and increases the prices. During that period, the import LC increased by 38 percent. That is, due to the increase in the price of products in the last two fiscal years, less products have to be imported by spending more money. LCs fell by 27 percent in July-April of the current financial year. It was down 8 percent in the same period last fiscal.
Analysis of the data shows that imports have been decreasing for the last four years on an average. It may decrease further in May-June. Because to deal with the crisis, the central bank has largely reduced the sale of dollars from the reserve. They want to hold the reserve. On the other hand, the import expenses are not being met with the dollars coming from various banks for exports and remittances.
As a result, many banks are now unable to open LCs. Especially those who have dollar income i.e. exporters are now able to open LC on demand. Those who do not have dollars cannot open LC even with 100% margin. In this way, imports are decreasing in all sectors except raw materials and essential products of export products.
In July-April of the current financial year, consumer goods decreased by 18 percent, industrial intermediate raw materials by 31 percent, industrial raw materials by 32 percent, industrial machinery by 60 percent, various machinery by 46 percent and other sectors by 20 percent. Only fuel oil import LC has increased by 2.5 percent and coal LC has increased by 28 percent. Import of gas has also decreased. As the prices of these products increase in the international market, the cost of imports has increased on the one hand, while the volume of imports has decreased on the other hand.
Due to the inability to import these products as per the demand, there has been a big crisis in power generation. Heavy fire on one side, loadshedding and water shortage on the other side – these three together cause extreme suffering in public life. However, the rains of the last two days have reduced the suffering a little. At the same time, there was a big disaster in the production in the industrial and agricultural sectors. Export orders fell in the global recession. Out of this, LC of import of raw materials of export-oriented industries has decreased by 35 percent. This will have a negative impact on exports in the future.
In this context, the Executive President of Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) Mohammad Hatem said, I wanted uninterrupted gas-electricity even at higher prices for the sake of keeping the industry alive. It doesn’t match. This is causing a lot of damage to the industry. Large industries now survive in some form. Small industry is now in big crisis. The longer this condition lasts, the greater the damage will be. New crises will arise in business.
According to the Central Bank report, the target of reducing imports in the current financial year was 9 percent. But due to the dollar crisis, it decreased by 14 and a half percent during the last July-April period. That is 5 and a half percent less than the target. Although the dollar has been saved somewhat, employment related to import-dependent industries has decreased, and commodity prices have also increased due to supply shortages. As a result, the burden of reducing imports now falls on the shoulders of the consumer in two ways. On the one hand, they have to buy products at higher prices. Incomes, on the other hand, have fallen, shrinking the market for new work. The unemployed are not getting jobs.
In this context, the former chief economist of the World Bank’s Bangladesh Resident Mission. Zahid Hossain said, due to the dollar crisis, a new crisis has arisen in the economy due to import control for a long time. Due to reduced imports, the supply of goods has decreased, prices have increased. Attempts were made to reduce the rate of inflation by controlling imports. But now the inflation rate is increasing due to low imports. Its negative impact will increase in the coming days.
The highest import LC was opened in March last year at $9.51 billion due to the increase in commodity prices in the international market due to the Russia-Ukraine war. Earlier in that financial year, LC openings had crossed the $8 billion mark for four consecutive months. The controls were imposed after imports surged in March. It imposed the first 25 percent margin on April 11 of that year. Later it was further expanded into luxury goods. Other controls were also imposed, including raising tariffs. As a result, imports fell to $841 million in April. It fell to $696 million in May and $702 million in June.
In July-August of the current financial year, it was further reduced to 6 billion dollars. It came down to $5 billion in October. It fell further to $4.75 billion in November. LC opening increased again from December due to fasting and Eid. LCs opened at an average of $5 billion per month from December to March. It fell further to $4.3 billion in April. It is now at its lowest point in the recession.