Imports have continued to fall across a broad range of industrial sectors in Bangladesh, as prolonged import restrictions, tight monetary conditions and political uncertainty weigh heavily on trade and production.
More than three years after the Bangladesh Bank first imposed the measures to manage a severe US dollar shortage, many of those restrictions remain in force – complicating imports and slowing industrial growth despite some recent stabilisation in foreign currency reserves.
Banks continue to exercise extreme caution when opening letters of credit (LCs), forcing importers to navigate extensive documentation, heightened bank scrutiny and multiple layers of approval.
According to Bangladesh Bank data for the first four months (July-October) of the current 2025–26 fiscal year (FY26), LC settlements for capital machinery stood at $628 million, reflecting a 9.53% decline from $694 million in the corresponding period of FY25.
This contraction mirrors a broader downturn in industrial investment as businesses refrain from purchasing new machinery amid liquidity shortages and policy uncertainty.
The decline extends across key industrial sectors. LC openings for textile machinery fell by 37.63% and settlements dropped by 26.47%.
Jute imports recorded a complete halt in LC openings, with settlements falling by 83.86%.
The garment industry also experienced reduced activity, with LC openings down 13.78% and settlements declining marginally by 0.36%, despite earlier months showing temporary increases in LC openings.
Imports of intermediate goods fell sharply, dropping 19.19% during the July–October period.
Among these sectors, clinker and limestone imports declined by 19.98% in LC openings and 22.6% in settlements.
BP sheet imports fell by 51.02% and 54.50%, while tin plate imports decreased by 64.38% in openings and 22.7% in settlements.
Scrap vessel imports also contracted significantly, with openings down 34.06% and settlements down 0.96%.
Non-ferrous metal imports fell by 51.48% in openings and 38.66% in settlements, while iron and steel scrap declined by 14.93% and 28.25% respectively.
Industrial raw material imports dropped by 1.62% during the period.
Among raw materials, crude edible oil imports decreased by 9.61% in LC openings and 6.05% in settlements. Raw cotton imports declined by 8.17% in LC openings and 17.32% in LC settlements. Cotton yarn imports fell by 10.33% in openings, with settlements down slightly by 1.05%. Synthetic fibre and yarn imports fell by 16.81% and 9.61% respectively.
Some items, however, demonstrated mixed movement. LC openings for seeds increased by 77.24%, but settlements fell by 32.71%.
Textile fabric imports saw a 10.28% decline in LC openings, but settlements registered a slight rise of 1.39%.
Shams Mahmud, president of the Bangladesh Thai Chamber of Commerce and Industry, told the Daily Sun, “Raising interest rates to control inflation is a contractionary measure in Bangladesh. While it may help curb inflation, it severely undermines investment.”
He highlighted several challenges facing the country’s exports in the global market. “Production costs have only gone up. With the current high interest rates, sustaining a business with a working capital loan has become nearly impossible. The dollar shortage also has made LC approvals increasingly difficult.”
He said banks were “now being encouraged to invest in treasury bonds, worsening liquidity constraints for industrial borrowers. Only trying to keep existing operations alive and that nobody is thinking of expansion because in current political situation.”
Mohammad Hatem, president of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), highlighted fuel shortages and limited access to bank financing as additional barriers.
He criticised the central bank’s contractionary monetary stance, noting that rising interest rates have made borrowing more expensive at a time when industries need support rather than tighter controls.
“I don’t see anything positive on the horizon. In such circumstances, who would invest?” he asked.
Former Dhaka Chamber of Commerce and Industry (DCCI) president Rizwan Rahman echoed these concerns, stressing that economic recovery is impossible without political stability and institutional trust.
He reiterated the importance of law and order in restoring investor confidence, warning that “no investor would risk capital without assurances of safety,” and calling on the government to restore public security and trust in institutions.
Dr Mustafa K Mujeri, executive director of the Institute for Inclusive Finance and Development (INM) and former chief economist of the central bank, warned that rising lawlessness, politically motivated lawsuits and attacks on businesses are harming both the economy and social cohesion.
He cautioned that without decisive corrective measures, Bangladesh risks falling into a deeper economic and political crisis.
Bangladesh Bank first imposed strict import restrictions in 2022 to protect dwindling reserves, including 100% cash margins for LC openings, higher import tariffs, and a suspension of bank financing for many imported goods.
Although reforms introduced after August 2024 – most notably the move to a market-based exchange rate – have helped ease the dollar crunch and improve reserves, many of the earlier restrictions remain firmly in place. The country’s foreign exchange reserves stand at $31.21 billion, according to figures released by the Bangladesh Bank on 1 December.
Central bank officials confirmed that a 100% cash margin is still required for a wide range of goods, including motor vehicles, electronics, luxury items and even ready-made garments. Bank financing for these items remains suspended, restricting trade and constraining industrial activity.
Syed Mahbubur Rahman, managing director and CEO of Mutual Trust Bank, welcomed the shift toward a market-based exchange rate but urged full liberalisation.
He argued that the dollar supply has stabilised sufficiently to justify removing remaining restrictions, which he believes would revive economic activity and allow the market to determine the true value of the currency.
Courtesy: Daily Sun.
Bd-pratidin English/TR
