I had just commented in previous post [Business will be further squzzed and negative GDP growth will be reflected (if not cooking the book) as trailing indicator.] And now this....
Import of industrial raw material, machinery slows down in H1
Staff Correspondent
Industrialisation has been showing signs of stagnation as opening and settlement of letters of credit for import of industrial raw materials and capital machinery slowed down significantly in the first half of the current fiscal year.
LC opening for industrial raw materials in July-December posted a negative growth of 8.68 per cent and capital machinery a negative 34.96 per cent growth compared to 68.87 per cent and 85.67 per cent growth respectively in the same period of the previous fiscal year, according to Bangladesh Bank data released on Thursday.
The growth in settlement of LCs or actual import payment for industrial raw materials dropped by 13.43 per cent and capital machinery by 23.32 per cent in July-December compared to that of 45.63 per cent and 34.94 per cent respectively in the same period of FY2010-2011.
Business leaders and economists said, although the central bank was on course of achieving its target of reducing the overall import growth, the policy would take a heavy toll on industries as import of fuel oil to run the costly rental power plants could not be decreased.
‘The opening and settlement of LCs for industrial raw materials and capital machinery in the first six months of the year are giving a clear indication that industrialisation is stagnating in the country,’ Federation of Bangladesh Chambers of Commerce and Industry president AK Azad told New Age on Saturday.
‘The situation is likely to get worse in next six months because of high bank interest rate on lending and prevailing dollar shortage,’ he said.
Azad said the government’s ‘wrong policy’ of tightening money supply to the private sector was pushing the industrial sector into trouble. ‘How will the industries run their operations, if they cannot import raw materials and machinery,’ he asked.
He also predicted that the growth in the gross domestic product this fiscal year might decline. ‘We have been requesting the government for months to reduce the interest rate on lending but the rate has gone even higher to 20 per cent [from around 15-16 per cent],’ he said.
Bangladesh Institute of Development Studies research director Zaid Bakht told New Age that the expected GDP growth of 7 per cent in the current FY might not be achieved as sluggish import of capital machinery and raw materials would affect the overall industrial production.
He said, ‘The import of capital machinery and raw materials should be kept afloat for the sake of GDP growth by decreasing government spending on import of products for its various projects.’
The central bank has recently taken a tighter monetary policy for the January-July period under which it aims at cutting imports amid a dwindling foreign currency reserve and sluggish export growth.
As on Thursday, the country’s forex reserve stands at $9.30 billion coming down from $11.32 billion in March 2011 due mainly to the soaring import of fuel oils by the government to run the costly rental power plants.
According to the BB data, the total growth in import payment made in July-December came down to 16.09 per cent from that of 40 per cent in the same period of the last fiscal year.
Settlement of LCs in the first half of the current fiscal year was $17.43 billion against that of $15.01 billion posted in the same period of last fiscal.
In contrast, the year-on-year import of fuel oils in July-December grew by 67.72 per cent.
Settlement of LCs for fuel oil in July-December posted $2.42 billion against that of $1.44 billion in the same period of FY2010-2011.
BB data showed LCs for $7.28 billion was opened for industrial raw material import in July-December against $7.97 billion posted in the corresponding period of the last fiscal year.
LC settlement for the items totalled $6.62 billion in July-December against that of $5.84 billion in the first half of FY2010-2011.
Letters of credit for $1.04 billion were opened for capital machinery import while LC settlement was $1.20 billion in the first half of FY2011-2012 against $1.60 billion and 0.97 billion respectively in July-December of FY2010-2011.
Azad said, if the BB wanted to bring down import growth of non-essential and luxurious items, the businesses had no problem. ‘But employment generation will be affected, if imports of raw materials and machinery continue to decline.
New Age | Newspaper
