Industrial sector suffers as raw materials crisis hits production

Al Amin :
The country’s manufacturers are suffering an acute raw materials crisis as they are still failing to open letters of credit (LCs) for the import of primary goods due to foreign currency shortage in the country.
The businesses have to wait for months to open LC in the banks to import raw materials amid the dollar crisis and it has created a terrible shortage of raw materials in the market.
Bangladesh Bank officials, however, said that the dollar crisis has reduced slightly due to higher remittance inflow and export earnings compared to the import expenditure, although it is yet to reach normal time.
The number of LC opening has increased as the dollar supply improved somewhat. On average, the banks are opening LCs around 1,800 to 2,000 per day, which was below 1000 a month ago.
The central bank is encouraging open LCs mostly for the import of essential commodities, the officials said.
But the entrepreneurs said that they are facing a shortage of raw materials in the industrial sector as they are still not being able to open LCs due to dollar shortage.
The raw material prices soared in the global market soon after the commencement of the Russia-Ukraine war. It invited an acute dollar crisis in the country and prompted the central bank to impose import restrictions in phases to keep the situation under control.
Md Shahidullah Azim, Vice President of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), told The New Nation, “Dollar crisis is still on. We are suffering from raw materials shortage as we are failing to open LCs for import of it and production is hampered severely.”
He also informed that the import of capital machinery for new investment has also declined due to the dollar crisis, which will impact on employment generation in days to come.
The country has a severe shortage of greenbacks due to its dwindling foreign reserves and a sharp drop in the value of the Taka against the dollar.
The country’s foreign currency reserves have already dropped to $31.15 billion on Thursday and the value of the taka has fallen by 27 per cent from 84 to the dollar to 107.
To protect the declining reserves, the government imposed restrictions on imports of all non-essential goods and reduced the supply of dollars to commercial banks.
This has not only forced banks to refuse new letters of credit applications but also has made their promised payments to foreign suppliers for previous imports uncertain.
A bank official, whishing anonymity, said that the central bank is still discouraging the import of non-essential goods to save the foreign currency and it also increased monitoring.
The central bank asked the bank to inform it to open LC for the import of goods worth $3 million, he said.
Bangladesh exported goods worth $32.44 billion in the July-January period of the current fiscal year (2022-23) with a nearly 10 per cent year-on-year increase, while the remittance inflow increased by 4.28 percent to $14.01 billion during the mentioned period.
Against it, imports fell by 5.66 per cent to $44.03 billion in the July-January period compared to the same period last fiscal year, according to Bangladesh Bank data.