The import of capital machinery in Bangladesh has plummeted, reflecting the deepening economic uncertainty facing the nation. Data from Bangladesh Bank reveals a stark decline in letters of credit (LCs) for machinery imports across all industrial sectors during the first five months (July-November) of FY25.
The value of LCs opened for capital machinery imports fell to $690 million, a sharp 28.75% drop from $969 million in the same period of FY24. Similarly, LC settlements declined by 21.62%, from $1,101 million to $863 million.
The textile and leather sectors, two key pillars of the economy, saw LC openings drop by 34.20% and 23.60%, respectively. While LC settlements for textiles decreased by 18.11%, leather bucked the trend with a 22.28% increase in settlements.
Conversely, some industries experienced mixed results. LC openings for jute surged by 170.84%, and garments by 16.44%, but settlements for jute fell by 25.43% and garments by 8.95%. Meanwhile, pharmaceuticals and packaging saw significant declines, with LC openings dropping by 35.29% and 44.55%, respectively, and settlements plunging by 53.41% for pharmaceuticals and 64.46% for packaging.
LC openings for iron and steel products, tractors, power tillers, and motor vehicles also saw steep declines, with settlements reflecting similar downward trends. Only computers and accessories recorded a slight 2.91% rise in LC openings, though settlements fell by 23.82%.
The decline is further compounded by the political turbulence following the ousting of the Awami League government on August 5, 2024, in a student-led uprising. The interim government, led by Professor Muhammad Yunus, struggles to stabilize the nation. Protests, labor strikes, and disruptions in factory production have heightened business leaders’ concerns about the future.
Economic policies have also contributed to the downturn. Shams Mahmud, president of the Bangladesh Thai Chamber of Commerce and Industry, explained that import restrictions to manage the dollar crisis have created hurdles for entrepreneurs trying to procure essential raw materials. “There is no question of new investments in this situation,” he said, noting that banks are being incentivized to invest in treasury bonds instead of the industrial sector.
Mohammad Hatem, president of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), pointed to rising bank interest rates and a contractionary monetary policy by Bangladesh Bank as significant barriers to industrial growth. “With inflation control as the priority, loans are harder to secure. Coupled with the fuel crisis and liquidity shortages, there’s little incentive for new investment,” he said.
Economists and business leaders are urging the interim government to prioritize dialogue with the private sector and ensure the smooth operation of businesses to avoid further economic decline. However, with political instability persisting, the outlook for industrial growth remains bleak.
Courtesy: Daily Sun
Bd-pratidin English/ Jisan
