Bangladesh's pharmaceuticals sector is rebounding on the back of smooth imports of raw materials, a well-maintained supply chain, and a higher opening of letters of credit, highlighting the recovery following challenges over the last two years, industry people say.

The LC opening for the import of raw materials by drug manufacturers increased 17 percent year-on-year to $542.42 million in July-December of the current fiscal year, central bank data showed.

It was down 22.41 percent in the same period of 2022-23 from a year earlier.

"The increase in the import volume of raw materials is a positive sign for the pharmaceuticals sector. This indicates that we are on the path to recovery," said M Mohibuz Zaman, managing director of ACI HealthCare Ltd.

Bangladesh heavily relies on imports to meet around 85 percent of the raw materials needed to feed the nearly $4-billion industry. This costs the country about $1.3 billion annually.

The sector, which meets 98 percent of local consumption, needs around 3,500 varieties of raw materials, mostly brought in from India, China, and Japan.

The over-dependence on the external sector for inputs means the industry was hit after the cost of production rose following a surge in prices in the global markets and a significant fall in the value of the taka that made imports costlier.

"The pharmaceuticals sector may recover from the crisis in terms of raw materials imports thanks to dedicated efforts from the manufacturers and the government's policy support," said Mohammad Mujahidul Islam, executive director for marketing and sales at Eskayef Pharmaceuticals Ltd.

"We can say that any doubt about facing a shortage of life-saving medicines has dissipated."

Islam added that pharmaceutical manufacturers' profits, which slumped in the past two years, increased slightly.

He also credited the supply chain management of the overall pharmaceuticals sector for the rebound.

"We emphasised the import of raw materials to ensure the supply of life-saving drugs, avoid any crisis, and tackle emergencies," said EH Arefin Ahmed, executive director (marketing) of Incepta Pharmaceuticals Ltd.

He said they have ensured stability in the supply chain and maintained an adequate stock to tackle future challenges.

"The sector has learnt important lessons while successfully navigating the challenges stemming from the Covid-19 pandemic and the Russia-Ukraine war."

"This has been another reason that helped the sector rebound. Even we imported additional raw materials for high value and essential medicines."

He thanked the government policy for the smooth opening of LCs.

The central bank has introduced restrictions to limit the purchase of non-essential goods and raw materials from international markets to prevent the depletion of the foreign currency reserves, which have halved in the past two years owing to higher commodity prices in the global markets.

Monjurul Alam, chief executive officer at Beacon Medicare Ltd, said the sector would make a comeback strongly in the second half of 2023-24 thanks to the adoption of innovative strategies.

"The sector will fare well on both domestic and international fronts as the opening of LCs is improving. New export destinations will also emerge."

He noted if there is no volatility in the foreign exchange rate market, the sector would recover.

The taka has lost its value against the US dollar by about 30 percent in the past two years amid the sharp decline in the forex reserves and any further depreciation of the currency can't be ruled out since the economy is still not out of the woods.

Alam, however, added that manufacturers have had to settle LCs at rates that are higher than when they were opened. "This has increased the cost of production."

The taka's significant depreciation and higher raw material, energy and finance costs have pushed up the manufacturing cost, hitting profits.

Profits of listed pharmaceutical companies shrank in 2022-23, the first decline in at least five years.

Alam ruled out the possibility of a shortage of necessary medicines in the coming days.

Pharmaceutical exports declined 23.7 percent to $175.4 million in FY23. The shipment, however, rose 9.98 percent year-on-year to $117.38 million in July-January of FY24, data from the Export Promotion Bureau showed.