Capital machinery, intermediate goods and raw-material imports have plummeted amid dollar dearth and restrained foreign trade, giving analysts and economists to believe that Bangladesh’s economy bears its cascading impact.
The slump may result in production contraction and further consumer-market waywardness, they said while talking to The Financial Express Wednesday.
They pointed out that investment and employment have been sluggish and its negative impact may drag on in the future days as the latest monetary policy and other financial-correction measures are not clear in this regard.
Bangladesh Bureau of Statistics (BBS) provisional data show that the investment-GDP ratio has fallen to 31.25 per cent in the current FY2023. In the past FY2022, the ratio was recorded a bit higher at 32.05 per cent.
Besides, the number of unemployed people in the country also increased to 2.59 million in the first quarter (January-March) of 2023, up from 2.32 million in the last quarter (Oct-Dec) of 2022, the quarterly Labour Force Survey of the BBS show.
Customs Department of the National Board of Revenue (NBR) and Bangladesh Bank (BB) data make it clear that import of capital goods, including capital machinery, the main input for investment expansion, has the biggest fall by 18.8 per cent during the first 10 months (Jul-April) of the current fiscal year, 2022-23 compared to the same period last FY2022.
In the Jul-April period, the capital goods imports decreased to UD$1.13 billion from $1.39 billion in the same period last fiscal.
The import of raw materials for Bangladesh’s highest-export-earning sector—readymade garments (RMG)—had also fallen by 21.3 per cent during this past July-April period compared to the corresponding period last fiscal, NBR customs data show.
During Jul-Apr period this FY2023, the import of the raw materials for RMG declined to $14.65 billion from $18.62 billion in the corresponding period.
Besides, the intermediate goods import also declined by 17.7 per cent in 10 months to April 2023, the customs data showed.
The import of intermediate goods fell to $37.48 billion compared to $45.51 billion in the same period as per BB count.
Higher import of capital machinery, raw materials, and intermediate goods represent a boost in investment in industrial and infrastructural development.
In Bangladesh, businesses usually import capital machinery and primary and intermediate goods for expanding industrial units and setting up new plants, increasing production, and the government does it to develop infrastructures.
The fall in import of the above-mentioned products has affected investment and job creation in the country, analysts said.
Meanwhile, the import of the consumer goods increased 1.9 per cent to $4.92 billion during the first 10 months of the current FY, the BB data show. In the same period last FY, the import of consumer goods was recorded at $4.83 billion.
Among the capital goods, the import of capital machinery fell to $4.0 billion in the July-April period from $4.64 billion in the corresponding period, the NBR’s Customs data show.
Former World Bank Lead Economist Dr Zahid Hussain says the negative growth in capital machinery and raw material imports has affected investment and employment, which is already visible. “Till date, the foreign-exchange reserves are not improving and there is no clear indication on it. In addition, the latest monetary policy has not acknowledged the reserve shortage and thus does not have any specific or clear management plan…investment and industrial production will be affected. The employment scenario will be in trouble,” he says.
An FE analysis has found that capital-machinery import was the highest in FY2018 in seven years, starting from FY2015, when local businessmen and the government bought the machinery worth $5.46 billion from abroad.
The procurers brought in the equipment for expanding their industrial plants or setting up new factories or developing infrastructure.
Since then, the import has been on the decline, according to the BB data obtained from the NBR’s customs department.
A big fall was registered in the FY 2020 when the machinery import plunged by nearly 34 per cent year on year to $3.58 billion. The pandemic was responsible for this.
During the July-March period of FY 2021, the import showed a falling trend as it dropped by 12.76 per cent to $2.63 billion from the same period in FY 2020.
The FE analysis, however, found the machinery import statistics between FY2015 and FY2018 an indicator of a booming economy.
According to the central bank, capital-machinery import in FY 2015 stood at $3.32 billion. In FY 2016, the import rose to $3.55 billion. The import swelled by 7.35 per cent to $3.82 billion in FY 2017, the BB data showed.
But the capital-machinery import jumped to $5.46 billion in FY 2018, maintaining a massive 43-percent rise over that of the previous fiscal.
Policy Research Institute (PRI) Executive Director Dr Ahsan H Mansur told the FE that it is definitely a concern for Bangladesh that the imports of capital machinery and raw materials are declining.
“It has already affected investment and job creation, which may continue in the future days too as we do not have a clear picture of the foreign-exchange reserves,” he added.
“The declining trend of foreign-exchange-reserve position is not rebounding. The correction measures of the government are also absent to a big extent. So the coming days may be not good,” Dr Mansur forecasts.
“However, we are eagerly waiting for the government about the implementation of the monetary policy and other reforms to return from the financial and economic crisis,” the economist says.
The Centre for Policy Director (CPD) in an analysis in its ‘State of economy in FY2022-23’ report recently said although the global prices of different materials are declining, but composition-wise import is falling, which are the concerns for investment.
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