Traders find themselves facing various types of crises at year-end as they are further crippled by the dollar crisis triggered by the Russia-Ukraine war.

The Bangladesh Bank's desperate attempt to conserve foreign exchange reserves by controlling imports has backfired for many businesses. With the import of crucial industrial raw materials restricted, production lines have slowed down and sales have plummeted, leaving traders staring at significant losses.

Traders point to potential solutions like boosting remittance inflows and export earnings. They believe clamping down on illegal practices like hundi money transfers and money laundering could unlock hidden capital flows and provide much-needed financial oxygen to the import-dependent economy.

The central bank's import restrictions, enforced since mid-2021, have created a chokehold on businesses. Letter of credit (LC) approvals have become sluggish, leaving importers unable to bring in essential goods, from foodstuffs to machinery. Factory owners, struggling to procure raw materials, face cascading challenges as fuel oil prices climb, pushing up transportation and other operational costs.

Production costs in factories increased after the increase in industrial gas prices earlier in the year. Due to these reasons, many domestic producers are in crisis.

As a result, on the one hand, the price of the product has increased in the domestic markets, on the other hand, it has become difficult to continue the production due to the complications with the import of raw materials.

According to the data of Bangladesh Bank, import credit opening has decreased by 18 percent so far in the current financial year 2023-24. And loan settlement decreased by 22 percent. 1 thousand 52 million dollar loans were opened during July-August. During the same period last year, loans worth $1,285 million were opened.

On the other hand, in the last two months, 1 thousand 177 crore dollars of debt has been settled. During the same period of last year, $1 thousand 514 crores of loans were settled.

Although the businessmen have held several meetings with the government and Bangladesh Bank to keep the import of industrial raw materials and energy normal amid the dollar crisis. But the response was not as expected.

Therefore, FBCCI President Mahbubul Alam urged the Bangladesh Bank to play a more effective role in solving the dollar crisis and controlling inflation. Besides, he also urged the concerned authorities to ensure an uninterrupted supply of energy to continue the production system in the industries.

After the start of the Russia-Ukraine war, there was a dollar crisis in the country. After that, the dollar rate rose by about 27 percent. As a result, the import of agricultural machinery has decreased, and the prices of these have also increased by about 30 percent. This affects the entire agricultural sector.

Meanwhile, prices have increased and sales have decreased, starting from car engine parts, agricultural and construction machinery, plastic product molds, nuts-bolts, and bearings. The manufacturers of these parts in Dhaka's Keraniganj said that after the Russia-Ukraine war, the price of raw materials started to increase, and it is continuing.

According to the demand, about 40 types of agricultural machinery are made by the owner of Janata Engineering Oli Ullah of Chuadanga. He said, “Earlier, I used to open loans with a margin of 10 percent or less. Now I can't open a loan even with a 100% margin. It takes two to three months for the raw material to arrive. All this time money has to be left in the bank. In this, the working capital of small businessmen like us is getting stuck”

Former president of FBCCI Jasim Uddin said, “To reduce the pressure on the dollar, traders should play a more conscious role in importing products. The rate of import of unnecessary and luxury goods should be further reduced. He also commented that there is no alternative to cut down the import of goods after the economic crisis.”

According to the National Board of Revenue (NBR) data, imports of export-oriented garments, textiles, cement, plastics, animal feed, shipbuilding, ocean-going ships, medicines, and chemical raw materials have decreased by 3 to 57 percent in the first quarter of the current financial year 2023-24.

Entrepreneurs said that the import of raw materials from various export-oriented sectors has decreased due to the decrease in purchase orders from foreign buyers.

BGMEA Vice President Shahidullah Azim said that the import of raw materials has decreased due to low purchase orders of ready-made garments. Most factories are running at 60-75 percent production capacity. There is no overtime for a long time.

Zahid Hossain, the former Chief Economist of the World Bank's Dhaka office, has suggested that the price of the dollar should be completely left to the market to deal with the ongoing crisis.

He said, “In 2003, Bangladesh began to implement market-based dollar prices." After that, although there were various economic crises in the world, we did not see any major instability in the dollar market in the country. So by leaving the dollar price to the market, we can see if it works to solve the problem or not.”

(The article was published on print and online versions of The Bangladesh Pratidin on December 31, 2023 and has been rewritten in English by Tanvir Raihan)