L/C opening and settlement declined by 30.25 pc and 9.63 pc respectively
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 industrialisation, 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.
L/C opening for importing capital machinery was US$ 4,319.21 million in the eleven months of the just concluded fiscal 2018-19 while it was 6,192.78 million during the corresponding period of its previous fiscal 2017-18. The L/C opening was declined by 30.25 percent.
On the other hand, the settlement of Letter of credit (LCs) on capital machinery import was declined by 9.63 percent in the first eleven months (July to March) of the outgoing fiscal 2018-19. The capital machinery import was $ 4,346.75 million during the period of the outgoing fiscal while it was $4,810.01 million during the corresponding periods of its previous fiscal 2017-18.
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.
Already, the private sector credit growth came down in the recent months. It was 12.16 percent in May this year against the target of 16.50 percent.
Talking to Daily Industry, 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.
He said private sector credit growth is hampering for liquidity crisis of banks as well as government borrowing.
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.
In this backdrop, at the end of March this year, the total non-performing loans stood at Tk 1.15 lac.
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, the stakeholders. 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, they said. The fall of capital machinery import payment indicating industrial sector weakness, they added.