Ballooning imports raise concern, says economist Mansur

Economist Ahsan H Mansur believes import spending may balloon to $60 billion this fiscal year.

At the current exchange rate, the amount would be approximately Tk 5 trillion, which is Tk 1 trillion more than the national budget for fiscal 2017-18 and Tk 500 billion more than the probable budget for the coming fiscal year.

Mansur said the rapid rise was a matter of some concern.

In an interview with bdnews24.com, the economist said imports had risen 29 percent in the first half (July-December) of the current fiscal year and spending on imports was rising by the month. More letters of credit are being issued as well.

“According to my calculations, the country’s import spending will pass $60 billion.”

Causes

Asked about the cause of the deficit, Ahsan Mansur, the executive director of Policy Research Institute, said: “The recent leap in spending is largely the result of necessary materials being imported for the Rooppur nuclear power plant project. Spending has also risen as a result of increasing imports of rice, fuel oil, capital machinery and raw materials for construction.”

An estimate on the amount of raw materials and machinery imported for the Rooppur project in the July-December period was not available

But, in that period, spending on food imports (rice and wheat) increased 212 percent, capital machinery import spending increased 34.58 percent, fuel oil import spending rose 28 percent and raw material import spending rose 15 percent.

According to the information released by Bangladesh Bank on Sunday, letters of credit amounting to $40.23 billion were extended in the July-December period, a 75 percent increase year-on-year.

Import spending on rice has increased 113 times in the past six months.

Wheat import spending rose 38 percent, onions 80 percent, fuel oil 27.57 percent and capital machinery 35 percent year-on-year in the same period.

Effects

Asked about the effect of the rise in import spending, Mansur said: “A normal increase in import spending is considered positive. Increases in imports of capital machinery and construction materials mean increasing investment.”

“But we often hear about import misinvoicing and some shipping containers are empty. Many try to launder money by over-invoicing (reporting larger sums on official documents).”

“For these reasons I do not see the increase as completely positive. I am a bit concerned as well.”

The increased imports could put pressure on foreign reserves, he said.

“For a while now we have been confident about one thing -- having $34 billion in reserves. But it will not remain there as import spending rises. I think reserves will fall to $30 billion quite quickly.”

“There would be no problem if export earnings and remittances also increased accordingly. But import spending is ballooning whereas exports and remittances are rising gradually.”

According to the Bangladesh Bank, reserves stood at $33 billion on Sunday.

Reserves will fall further once the Asian Clearing House import bill is paid in the first week of March, Mansur said.

Exports rose 6.55 percent in the first seven months of the current fiscal year, while remittances rose nearly 16 percent.