Imports for the manufacturing sector in Bangladesh plunged in the first four months of the current fiscal year, signalling to a weak economic recovery from the coronavirus pandemic.
In July-October, imports of capital machinery and industrial raw materials for major industries such as textiles plummeted along with some other intermediate goods.
As a result, overall import payments decreased 13 per cent year-on-year to $17.06 billion, the CIF import data from the central bank showed.
The cost, insurance, and freight (CIF) is an expense paid by a seller to cover the costs, insurance, and freight of a buyer’s order while it is in transit.
Import of raw cotton, one of the major raw materials for the readymade garment industry, which accounts for about 85 per cent of the national exports, stood at $814 million in the first four months, down 24.24 per cent year-on-year.
The dwindling import payment against relatively stable export earnings helped the country narrow down the trade gap. Exports rose to $ 12.55 billion during the four-month period in contrast to $12.41 billion a year ago.
The central bank, however, prepares the statement of the balance of payments based on the free-on-board (FoB) data of exports and imports.
The FoB indicates whether the seller or the buyer is liable for goods that are damaged or destroyed during shipping. This means charges for the insurance and freight are not calculated while preparing the FoB data.
Import payments stood at $15.78 billion from July to October, down 12.99 per cent if the FoB data of the central bank was considered.
“The reduced trade gap is apparently good for an economy during normal times. But the existing trade gap is not a good sign for the economy of Bangladesh at all,” said Mustafizur Rahman, a distinguished fellow of the Centre for Policy Dialogue.
The decline in imports means a lower output from the export-oriented sector as a huge volume of the imported items is used for making products for international markets, he said.
Exports will decline in the days to come if imports maintain the existing trend. “The GDP growth will be hit hard by the ongoing declining trend of the imports,” Prof Rahman said.
The economy is now in dire straits because of the pandemic, so the government needs to take measures to give a boost to the economy, he said.
Both the central bank and the government should emphasise implementing the stimulus packages quickly, which will give a momentum to the business sector, he said.
The cost of doing business should be brought down to ensure faster growth, he said.
Zahid Hussain, a former lead economist of the World Bank’s Dhaka office, said reducing the trade gap is a good sign for any economy and it has caused the foreign exchange reserve to balloon.
The reserve stood at $41.18 billion as of November 25 in contrast to $31.72 billion a year ago, aided mainly by a robust remittance flow.
“These events are helping the central bank inject liquidity into the market.”
But there is no scope to be complacent as the trade gap has narrowed in the wake of a collapse in demand, Hussain said.
“In brief, we can say that the indicators of the BoP are a signal of the weak economic recovery,” Hussain said.
The fall in the trade gap and the increasing trend of remittance fuelled the current account, a record of a country’s international transactions with the rest of the world.
Between July and October, the current account posted a surplus of $4.05 billion in contrast to a deficit of $1.52 billion.
“The sluggishness in the imported items for the textile and garment sectors is not a good sign at all,” said Asif Ibrahim, a director of the Bangladesh Garment Manufacturers and Exporters Association.
The industrial sector has been facing many challenges due to the business slowdown. The world has already been hit hard by the second wave of infections, he said.
“The government should think of unveiling the second round of stimulus packages to protect the economy from the existing crisis,” said Ibrahim, also a former president of the Dhaka Chamber of Commerce and Industry.