Bangladesh's Industrial Sector Faces Challenges Amid Decline in Key Imports

In the current fiscal year, Bangladesh's industrial sector has been significantly impacted by a steep decline in the import of capital machinery, raw materials, and intermediate goods. This downturn is adversely affecting industrial production and employment levels across the nation.

Recent data from the Bangladesh Bureau of Statistics (BBS) highlights a slowdown in factory output growth, which has dropped to 6.66 percent for FY24. This is a marked decrease from 8.37 percent the previous year, and significantly lower than the 9.86 percent and 10.29 percent growth rates observed in the two fiscal years before that. The overall import figures, as reported by Bangladesh Bank, reflect a 15.5 percent fall, totaling $49.22 billion in the July-March period of the current fiscal year, compared to $58.27 billion in the same period the previous year.

Ahsan H. Mansur, the executive director of the Policy Research Institute, attributes this decline to a combination of falling global prices and Bangladesh's struggles to finance imports due to a dollar crisis. The country faces pressure to maintain foreign exchange reserves and meet financial obligations, which has led to reduced production, stagnant investment, and slower overall growth. Mansur, a former economist with the International Monetary Fund (IMF), emphasizes the importance of increasing foreign exchange inflows through exports, remittances, and budget support to stabilize the dollar exchange rates and improve financial accounts. Without these measures, investment stagnation is likely to worsen, leading to higher unemployment and economic frustration.

The data further reveals a 14.2 percent drop in the import of industrial intermediate goods, which fell to $29.66 billion in the July-March period, down from $34.55 billion the previous year. Other intermediate goods saw a 20.2 percent decrease, with significant drops in imports of clinker, oil seeds, chemicals, fertilizers, plastics, rubber, and base metals. Specifically, clinker imports fell to $715 million from $927 million, oil seeds dropped by 10.1 percent, chemicals by 7.2 percent, fertilizers by 47.4 percent, plastics and rubber by 13.8 percent, and iron, steel, and other base metals by 8.7 percent.

The apparel sector, a major contributor to Bangladesh's exports, also experienced a decline in imports of related goods. Year-on-year figures show a 9.1 percent drop in the first nine months of FY24, with raw cotton imports decreasing by 24.9 percent, yarn by 10.2 percent, textiles by 8.2 percent, staple fiber by 6.1 percent, and dyeing materials by 3.1 percent. Jahangir Alamin, former president of the Bangladesh Textile Mills Association (BTMA), attributes the low import of raw cotton and yarn to inconsistent electricity and gas supplies, which have reduced production. He also noted that many factories had existing stocks, leading to decreased imports.

Additionally, imports of capital goods have fallen, with shipments decreasing by 22.5 percent to $8.07 billion from July to March, compared to $10.41 billion the previous year. Within this category, capital machinery imports dropped by 23.7 percent. This decline in imports has had a negative impact on investment, production capacity, employment, and GDP growth. The BBS workforce survey for January-March 2024 indicates a rise in the number of unemployed people in the country, increasing to 2.59 million from 2.47 million in December.

In conclusion, the significant decline in the import of essential goods and machinery has created substantial challenges for Bangladesh's industrial sector. Addressing the foreign exchange crisis, stabilizing the dollar exchange rate, and boosting exports and remittances are crucial steps needed to reverse this trend and support economic recovery.