Austerity works as Bangladesh's import orders dropped nearly 24 per cent or US$1.77 billion in August following regulatory measures to ease pressure on the economy from forex crunch, officials said.
The opening of letters of credit (LCs), generally known as import orders, came down to $5.65 billion in August 2022 from $7.42 billion in the same month of the previous calendar year, according to the central bank's latest statistics.
It was $6.22 billion in July 2022.
"The falling trend in overall import continues," a top central banker told the FE while replying to a query.
Import orders stood at $213 million during the first four days of September 2022 against $1.2 billion in the same period of August this calendar year. It was $842 million in July.
On the other hand, settlement of LC, generally known as actual import, in terms of value, fell by nearly 13 per cent to $6.47 billion in August from $7.42 billion a month before, according to the officials.
They also said such import is still maintaining an upward trend compared with the previous year because of clearing outstanding import payments.
Such actual import grew by more than 13 per cent to $6.47 billion in August from $5.72 billion a year ago, the Bangladesh Bank (BB) data showed.
However, total outstanding import payments stood at $34.84 billion in the past fiscal year (FY), 2021-22, against $26.67 billion in FY'21.
The central banker expects that the actual imports will decrease in the months ahead if the downturn in import orders continues.
"Falling trend in imports has emerged as a silver lining in the gloomy picture of Bangladesh's economy despite higher inflation along with the ongoing Russia-Ukraine war," another BB official said while explaining the impact of lower imports on the economy.
He also says higher inflow of remittances alongside export earnings will help bring stability in the country's economy within a couple of months if the regulator's close monitoring continues.
Meanwhile, Bangladesh's export earnings grew 25.31 per cent to $8.59 billion during the July-August period of FY'23 from $6.86 billion, year on year, while the flow of inward remittances rose more than 12 per cent to $4.13 billion from $3.68 billion.
"As a whole, declining trend in imports, increases in export earning and inward remittance are good indicators to the potential turnaround of the economy," Shah Md. Ahsan Habib, professor at the Bangladesh Institute of Bank Management (BIBM), said in reply to a query.
He also sees the falling trend in import involving 'unnecessary' and luxurious items as a very good trend for the economy-in time of a global crisis.
"We'll be able to manage volatility on the country's foreign-exchange (forex) market if the lower import orders continue in the coming months," the central banker, who is an economist, noted.
Talking to the FE, another BB official hoped Bangladesh external sector covering balance of payments (BoP), current-account balance and trade deficit would improve gradually if the existing trend of foreign trade and the inflow of remittances continued.
"Our forex market is expected to see stability in second quarter of the FY'23 because of weak monetary-transmission system in Bangladesh," the central banker notes.
The import orders are on a slope recently following different regulatory measures taken by both the government as well as the central bank.
Earlier on July 14, the central bank started monitoring LCs worth US$5.0 million and above initially, using its dashboard, to discourage 'unnecessary' imports.
Currently, in a further belt-tightening, the BB monitors the LCs worth $3.0 million and above on the same grounds.
Earlier on July 25, the bankers were asked at a bankers' meeting to comply with all the ten regulatory measures announced by the central bank aiming to improve the foreign-currency-liquidity situation on the money market.
Among the regulatory measures are encashing 50 per cent of total foreign currency held in relevant export-retention quota (ERQ) accounts, and slashing 5.0 percentage points of the net open position (NOP) limit of commercial banks.
siddique.islam@gmail.com