Import declined by 9.45 percent
Abu Sazzad: The lower import of capital machinery import is a concern for the experts because Bangladesh is depending on such modern equipments for its industrial production.
The consistent lower growth in the private sector is hindering the expansion of industrialization, as a result, the demand for capital machinery is declining in the recent months, industry insiders said.
Sources said capital machinery import for the garment and textile industry has declined in the first quarter of the current fiscal year due to financial sectors uncertainty and liquidity crisis. Settlement of Letter of credit (LCs) on capital machinery import was declined by 9.45 percent in the first nine months (July to March) of the current fiscal 2018-19. The capital machinery import was $ 3,612.68 million while it was $3,989.90 million during the corresponding periods of the last fiscal 2017-18.
On the other hand, the opening of LCs against capital machinery also declined by 27.66 percent during the first nine months the current fiscal. The amount was $3,753.44 million while it was $5,818.68 million during the same period of the last fiscal.
However, it is observed that the both opening and settlement of capital machinery import is declining in the recent months.
The persistent fall in capital machinery import indicated that the expansion of the private sector is stagnant in the country, opined experts
The slower growth in the private sector is impeding for generating more employment in the country. Bangladesh needs to ensure zero unemployment by to be a develop country by 2030, according Global Economist Forum (GEF) which was disclosed recently.
The sluggish growth in the private sector also put a negative impact on industrial production. Bangladesh needs higher industrial sector to become a mid-level status country by 2030, also said the global forum.
The import of capital machinery declined due to poor private sector credit growth putting negative impact on the industrialisation in Bangladesh, said stakeholders.
The negative growth in private sector credit and capital machineries import means private sector investments has come to a halt.
‘The investment situation is not consistent with the government’s claim of high economic growth, they said.
Poverty alleviation, employment creation and economic growth would become stagnant for inadequate private sector investment, they added.
The country’s annual average reduction of poverty, that has already started falling, would fall further unless adequate job was created, they opined.
Bankers said, private sector credit growth has fallen further in March due to liquidity crisis is prevailing in the commercial banks.
Meanwhile, the private sector credit growth came down to 12.42 percent in March which was 12.58 percent in February this year. In December, 2018, the growth was at 13.3 percent, according to Bangladesh Bank
However, Bangladesh Bank has a target of 16.50 percent growth in the monetary policy for the second half (H2) of this fiscal year (FY).
Talking to Daily Industry, Syed Mahbubur Rahman, chairman of Association of Bankers, Bangladesh (ABB) said private sector credit growth is hampering for liquidity crisis of banks as well as government borrowing.
General investors are investing their money to the government schemes mainly for getting higher interest rates on public savings instruments instead of deposit rates offered by the commercial banks, he explained.
He said all banks had put in a strong effort on fund hunting resulting in a surge in interest rates on deposits.
Sources said, now the private commercial banks are offering interest rates on term deposits ranging from 6 percent to 11 percent. On the other hand, interest on national savings certificates are between 11 percent and 12 percent, according to the central bank data.
Syed Habib Hasnat, managing director of NRB Global Bank said currently most of the banks are facing liquidity crisis resulting from the burden of Non Performing Loans (NPLs). At the same time, poor recovery from borrowers was a big reason for the slow credit growth in the private sector, he said.
The lion share of NPL amount is holding the large stakeholders and the recovery amount is not satisfactory despite different initiatives of the authorities concerned, Habib Hasnat mentioned.
“As a result, banks are failing to achieve the growth target of the private sector in the recent months and banks are forcing to provide lower amount in the private sector”, he said.
Ehsan Khasru, managing director of Padma Bank Ltd expressed his dissatisfaction on lower import of capital machinery due to sluggish private sector credit which is impeding industrilisation.
In this backdrop, at the end of 2018, the total non-performing loans amounted to Tk93,911crore from Tk74,303 crore a year earlier and the total outstanding loan with the private sector rose to Tk9,796.86 billion in March 2019 from Tk8,714.31 billion last year.
According to economists, the fall in capital machinery import is a bad sign for country’s economy. Bangladesh is mainly dependent on imported capital machinery and industrial raw material for industrial production.
Private sector credit gradually declined in the recent months, he said adding the large stakeholders are failing to expand their existing business. The sluggish private sector credit is one of the major reasons for declining the import of capital machinery, the business leaders said.
They urged the central bank for allocating more credit to the private sector for ensuring more industrial growth in the country.
Cost of doing business had increased in the recent years, they observed. Along with this, high lending rate and lower private sector credit is impeding the business community to expand their existing business, they added.
“If private sector expansion halts, it would fail to generate employment as well as putting negative impact on industrial production”, they said.
The negative growth in private sector credit and capital machineries import means private sector investments has come to a halt, said experts. Fall of capital machinery import payment indicating industrial sector weakness, they added.