The Bangladesh Bank plays a pivotal role in implementing strategies to boost reserves and curb imports, signaling a collaborative effort toward economic stability
In the first four months of the 2023-24 fiscal year (July 2023-June 2024), Bangladesh experienced a 24.07% year-on-year decrease in imports, amounting to nearly 22 billion US dollars, as per recent data from the Bangladesh Bank. The settlement of letters of credit (LCs), reflecting actual imports, was 21,974.48 million dollars during July-October, compared to 28,940.16 million dollars in the same period the previous year. Overall import orders, officially termed as the fresh opening of import letters of credit, also saw an 11.52% year-on-year decline to 21,819.12 million dollars during the same period. The country’s import payment for the period from July 2022 to June 2023 decreased by 15.76% to 69.50 billion dollars. In the 2022-23 fiscal year, Bangladesh’s trade deficit reduced by 48.41% year-on-year to 17.16 billion dollars due to decreased imports amid diminishing forex reserves. Aiming to increase Bangladesh’s declining foreign exchange reserves which fell below $20 billion just last week, the bank has implemented a number of deterrents to imports.
Import Declining Scenario in Bangladesh
According to current data from the Bangladesh Bank, imports into Bangladesh decreased by 24.07% year over year in the first four months of the 2023–24 fiscal year (July 2023–June 2024), totaling around 22 billion US dollars.
According to BB’s data, in the first month of the current financial year, imports decreased by about $1 billion or 15.04 percent. Imports in July of FY 2023-24 were $5.385 billion, compared to $6.338 billion in the same period of the previous fiscal year. In August, imports were $5.248 billion, showing a decrease of $2.128 billion or 28.85 percent from the previous year. In August of the last financial year, goods worth $7.375 billion were imported. In September, the import of goods was $5.277 billion, a decrease of $1.915 billion or 26.62 percent from the same period of the previous year. The total import in the first three months of the current financial year (July-September) was $15.909 billion, compared to $20.905 billion in the same period of the last financial year, reflecting a decrease of $4.996 billion or 23.90 percent.
In the initial month of the fiscal year 2022-23, imports amounted to $6.338 billion, marking a 23.28 percent increase from the previous fiscal year (2021-22). However, import growth gradually declined in August and September, with increases of 11.96 percent and 2.86 percent, respectively. October experienced negative growth of 6.41 percent, amounting to $7.111 billion. Import decline persisted in November, totaling $7.592 billion, a 3.35 percent decrease.
From December onwards, negative import growth intensified, reaching double digits. In December 2021-22, imports were $6.043 billion, a substantial 28.37 percent decrease. The third quarter of the fiscal year saw the most significant negative streak in import growth due to the dollar crisis, prompting Bangladesh Bank to implement supervision measures.
In January, February, and March, imports were $6.372 billion, $4.624 billion, and $6.085 billion, respectively, reflecting decreases of 23.48 percent, 44.45 percent, and 21.23 percent compared to the same period in the previous fiscal year. The third quarter (January-March) imports were $8.327 billion, $8.325 billion, and $7.725 billion, respectively.
April witnessed imports of $5.226 billion, a 32.32 percent decrease from the previous year. May and June saw import growth decrease to 11.15 percent and 33.52 percent, with imports totaling $6.465 billion and $5.097 billion, respectively.
The total import for the fiscal year was $75.062 billion, a 15.81 percent decrease from the previous fiscal year’s $89.162 billion.
Why is Bangladesh’s import Declining?
The decline in imports in Bangladesh can be attributed to various factors. Economic shifts, global supply chain disruptions, and the COVID-19 pandemic have significantly impacted international trade. Reduced consumer demand, both domestically and abroad, has led to a decrease in orders for goods, affecting import volumes. Additionally, fluctuations in currency exchange rates, rising transportation costs, and logistical challenges have contributed to a less favorable environment for imports. Bangladesh’s economic policies, such as trade restrictions and tariff adjustments, may also play a role in shaping import trends. The government’s efforts to promote domestic production and self-sufficiency could be influencing businesses to rely more on local resources, further impacting import figures. As the global economic landscape evolves, these multifaceted factors collectively contribute to the current decline in imports in Bangladesh.
Outcomes of Import Declining
Shrinking Bangladesh’s imports can have several economic and strategic benefits. Firstly, it can contribute to a favorable trade balance by reducing reliance on foreign goods, potentially stabilizing the country’s currency and strengthening its economic resilience. Import substitution, fostering domestic production to replace imported goods, can stimulate local industries, create employment opportunities, and nurture technological advancements.
Furthermore, a decrease in imports can enhance national security by mitigating external vulnerabilities. Diversifying the sources of essential goods and promoting self-sufficiency can make Bangladesh less susceptible to global economic fluctuations and geopolitical tensions. Additionally, a strategic reduction in imports aligns with sustainable development goals, fostering environmental sustainability by curbing carbon emissions associated with the transportation of goods. In the long term, such measures could empower Bangladesh to shape its economic destiny, fostering a more resilient and self-reliant nation.
Banks’ Initiatives to Boost Reserves and Curb Imports
In response to Bangladesh’s dwindling foreign exchange reserves and the imperative to curb imports, the Bangladesh Bank has implemented multifaceted strategies aimed at bolstering the country’s economic resilience. Firstly, financial institutions have prioritized fostering export-oriented industries by extending credit facilities and offering competitive interest rates to businesses engaged in export activities. This approach not only stimulates foreign currency earnings but also enhances the nation’s overall trade balance.
Furthermore, the Bangladesh Bank has collaborated with the government to introduce incentive programs for foreign remittances. By offering preferential exchange rates and reduced transaction fees for overseas remittances, the banking sector encourages a steady inflow of foreign currency, thereby contributing to the augmentation of reserves.
In a bid to discourage unnecessary imports, the Bangladesh Banks has tightened regulations on letters of credit (LCs) and trade finance. Rigorous scrutiny of LC applications ensures that only essential imports receive approval, aligning with the national agenda to reduce dependency on foreign goods. Additionally, financial institutions have actively promoted financial literacy programs, enlightening businesses about the economic benefits of supporting domestic industries and opting for locally produced alternatives.
Collectively, these measures represent a concerted effort by the Bangladesh Bank to fortify Bangladesh’s foreign exchange reserves, fostering economic stability and mitigating the challenges posed by imbalances in international trade.
Conclusion
Bangladesh’s significant decline in imports, attributed to global economic shifts, pandemic effects, and government policies, has prompted strategic measures to stabilize the economy. The reduction in imports not only addresses foreign exchange challenges but also aligns with national goals, fostering self-sufficiency, economic resilience, and sustainable development. The Bangladesh Bank plays a pivotal role in implementing strategies to boost reserves and curb imports, signaling a collaborative effort toward economic stability. The challenges posed by imbalances in international trade are being actively addressed through multifaceted initiatives, indicating a proactive approach by the banking sector to fortify the nation’s economic foundation.
