Import growth during this fiscal fell sharply due to decline in capital machinery import, amid liquidity crisis in the banking sector.
Recent data from Bangladesh Bank shows that import growth in first 10 months of the current fiscal year was 3.88 percent, when growth was 25.23 percent in the last fiscal year.
Import growth in terms of LC fell 15.40 percent year-on-year in May.
LC or Letter of Credit are issued by banks, on behalf of importers, guaranteeing that payment to a seller will be received on time and for the correct amount.
The total LC settlement stood at $4.6 billion in May compared to $5.4 billion in the same period of the last year, according to the central bank data.
“The capital machineries imported by government slowed down this fiscal year after intensive import in the last fiscal year. As a result, overall import growth declined,” said Sayed Mahbubur Rahman, managing director of Dhaka Bank.
“Moreover, banks were reluctant in lending to the private sector amid liquidity crisis, which also accounted for slow import growth,” he added.
The central bank data showed negative growth of capital machinery import more than doubled – from 4.47 to 10.63 percent - in the first 10 months of the current fiscal year, compared to the same period of the previous year.
The decline in capital machinery import is however contributing towards stabilizing the foreign exchange market.
The inter-bank exchange rate against dollar remained stable at Tk84.45 to Tk84.50 over the last couple of months.
The slowdown in import growth narrowed the trade deficit by 10.43 percent in the first 10 months of this year.
Economists and exporters have long been demanding depreciation of local currency against the dollar to support export growth and remittance flow.
During their recent budget analysis, Centre for Policy Dialogue said depreciation is a must right now to reduce trade imbalance.