Imports up despite drop in oil and food prices in international market

Bangladesh's expenditure on imports have increased despite the drop in oil and food prices in the international market as purchase of capital machinery from abroad have gone up.

Economists, bankers and entrepreneurs are considering this rise in imports ‘positive’ for the economy.

According to the central bank, Bangladesh imported goods worth Tk 29.76 billion in the first nine months of the current fiscal year, beginning July 1, registering a 12.21 percent rise over the same previous period.

Bangladesh Bank Governor Atiur Rahman said the increase in imports amid drop in oil and food prices suggested more investment was coming to the country.

Economists said the fall in euro prices had facilitated Bangladesh’s rise in imports of goods.

According to the central bank, euro was traded at Tk 87.17 on Wednesday in Bangladesh against Tk 107 in January last year. The exchange rate was Tk 84 in March this year.

Euro lost 23 percent of its value to taka in around one and a half years.

Bangladesh Institute of Development Studies (BIDS) researcher Zaid Bakht said entrepreneurs of the country were importing more goods from Europe taking the advantage of depreciation of euro.

“That’s why import expenses and trade deficit both are growing,” he said.

Bakht told bdnews24.com good quality products were coming to Bangladesh at low prices due to depreciation of euro.

“There were many questions from different quarters over the quality of the products that we were importing from China. Now we are importing better products at lower prices,” he added.

The economist said: “Our businessmen and industrialists are utilising this opportunity. That’s why imports of capital machinery, intermediate raw materials and other goods have increased, having a positive impact on investment.

“The downward trend in our investment will be over.”

Former president of Bangladesh Readymade Garment Manufacturers and Exporters Association (BGMEA) Anwar-ul-Alam Chowdhury Parvez agreed with Bakht.

He said: “It’s right that we’re being affected due to value loss of euro. We’re earning less by exporting more products. But we’re gaining in another way.

“When we’re importing machinery for setting up industries from Europe, they’re costing less. That’s why investment is going up.”

Bangladesh Petroleum Corporation (BPC) Chairman AM Badruddoza told bdnews24.com the country’s expenditure on oil imports would decline to Tk 170-180 billion in 2014-15 FY from Tk 380 billion in the previous FY.

In the international market, prices of per barrel refined oil had reached $150 which has now dropped to $60. Crude oil is now selling below $50 a barrel.

Badruddoza said the corporation was making profit dealing in oil since January this year.

According to the Bangladesh Bank, letters of credit worth $2.64 billion were opened for oil imports during July-March period of the current FY.

The figure was 27.47 percent less during the previous corresponding period.

On the other hand, opening of LCs for import of capital machinery rose by over 6 percent to $2.93 billion during the period, when LC opening for intermediate goods marked 11 percent increase.

$7.15 billion trade deficit in 9 months

The overall trade deficit stood at $7.15 billion during the July-March period of the current FY.

The figure is 57 percent higher than the amount in the same previous period and 2 percent more than what it was in the entire 2013-14 FY, when the deficit was $7.01 billion.

$1.14 billion deficit in BoP

The country is experiencing a ‘big’ deficit in the balance of payment in foreign trade.

The deficit was $1.14 billion in the first nine months of the current FY against $1.69 billion surplus in the previous FY.

Bangladesh was maintaining surplus in BoP until August this FY when it went on the negative trajectory.