Drought in Trade: Recession persists, raw material imports fall

In November 2024, raw material imports declined to $527 crore from $560 crore during the same period of the previous fiscal year, resulting in stagnation in Bangladesh's trade and commerce. Economists highlight that this reduction in imports contributes to rising inflation and escalating commodity prices, creating a challenging economic cycle that raises concerns among both Bangladesh's development partners and consumers. The decrease in imports is likely to intensify inflation, further affecting consumers directly.According to government data, the value of import transactions through letters of credit (LCs) decreased by 6% in November 2024, amounting to $527 crore, down from $560 crore in November 2023.

For the July-November period of the current fiscal year, total LC openings for import trade also declined by around 1% to $2797 crore. Data from Bangladesh Bank indicates that LC settlements during the same period dropped by 1% to $2788 crore.

Bankers attribute this situation to businesses taking a temporary pause in investment planning due to ongoing uncertainties, resulting in slower credit growth in the private sector and a subsequent decrease in imports.

They further noted that political changes following the student and public protests in July-August, and the subsequent fall of Sheikh Hasina’s government on 5 August, led to widespread attacks and vandalism on factories across the country, further paralyzing business operations.

Despite the challenges, experts remain optimistic that the situation will gradually normalize, allowing trade and commerce to resume full swing soon. This optimism is fueled by government measures such as removing taxes on essential imports and preparations for the high-consumption month of Ramadan. Bankers and experts expect import volumes to rise in the coming months.

M. Masrur Riaz, founder and chairman of the Policy Exchange of Bangladesh, expressed hope that the stabilization of the foreign exchange rate would help increase imports. Given Bangladesh’s heavy reliance on imported goods, higher import volumes could help mitigate inflation.

The Bangladesh Bureau of Statistics (BBS) reported that inflation rose to 11.38% in November 2024, with food inflation reaching 12.8%. The reduction in imports has further strained the economy:

Capital Machinery: Imports dropped by 29% to $6.9 crore during July-November, indicating a slowdown in industrial investment.

Intermediate Goods: These imports, essential for production, fell by over 12% to $169 crore.

Consumer Goods: Consumer goods imports decreased by 3.34%, totaling $260 crore.

Industrial Raw Materials: In contrast, imports of raw materials for industries increased by 4.8% to $980 crore, hinting at a slight recovery in industrial production activities.

Bangladesh’s reliance on imports underscores the need for stable foreign exchange rates and a conducive trade environment. Political stability and economic recovery are essential for reversing the downturn. Experts believe that as political and economic conditions stabilize, import activities will rise, supporting overall economic recovery.

The government’s efforts, along with private sector initiatives, must focus on reducing inflation, enhancing investment confidence, and ensuring uninterrupted trade activities to steer the economy back toward sustainable growth.