Rising imports raise concern, says economist Mansur

Economist Ahsan H Mansur believes import spending may balloon to $60 billion this fiscal year, reports bdnews24.com.
At the current exchange rate, the amount will be approximately Tk 5.0 trillion, which is Tk 1.0 trillion more than the national budget for fiscal year 2017-18 and Tk 500 billion more than the probable budget for the coming financial year.
Mansur said the rapid rise was a matter of some concern.
In an interview with the news agency, the economist said imports had risen 29 per cent in the first half (July-December) of the current fiscal year and spending on imports was rising by the month. More letters of credit are being issued as well.
"According to my calculations, the country's import spending will pass $60 billion."
Asked about the cause of the deficit, Ahsan Mansur, Executive Director of Policy Research Institute, said: "The recent leap in spending is largely the result of necessary materials being imported for the Rooppur Nuclear Power Plant project. Spending has also risen as a result of increasing imports of rice, fuel oil, capital machinery and raw materials for construction."
An estimate on the amount of raw materials and machinery imported for the Rooppur project in the July-December period was not available. But, in that period, spending on food imports (rice and wheat) increased 212 per cent, capital machinery import spending increased 34.58 per cent, fuel oil import spending rose 28 per cent and raw material import spending rose 15 per cent.
According to the information released by Bangladesh Bank on Sunday, letters of credit amounting to $40.23 billion were opened in the July-December period, a 75 per cent increase year-on-year.
Import spending on rice has increased 113 times in the past six months.
Wheat import spending rose 38 per cent, onions 80 per cent, fuel oil 27.57 per cent and capital machinery 35 per cent year-on-year in the same period.
Asked about the effect of the rise in import spending, Mansur said: "A normal increase in import spending is considered positive. Increases in imports of capital machinery and construction materials mean increasing investment."
"But we often hear about import misinvoicing and some shipping containers are empty. Many try to launder money by over-invoicing (reporting larger sums on official documents)."
"For these reasons I do not see the increase as completely positive. I am a bit concerned as well."
The increased imports could put pressure on foreign reserves, he said.
"For a while now we have been confident about one thing -- having $34 billion in reserves. But it will not remain there as import spending rises. I think reserves will fall to $30 billion quite quickly."
"There would be no problem if export earnings and remittances also increased accordingly. But import spending is ballooning whereas exports and remittances are rising gradually."
According to the Bangladesh Bank, reserves stood at $33 billion on Sunday.
Reserves will fall further once the Asian Clearing House import bill is paid in the first week of March, Mansur said.
Exports rose 6.55 per cent in the first seven months of the current fiscal year, while remittances rose nearly 16 per cent.