Imports of key essentials drop for dollar crunch
The import of essentials such as edible oil, chickpeas, dried peas and sugar fell in July-November as traders face difficulties in opening letters of credit (LCs) to purchase the items from international markets amid the US dollar shortage.
This led traders and importers to warn that there might be a shortage of the items during Ramadan when their demand usually surges.
The dollar shortage is at the heart of the lower imports of edible oil, chickpeas, dried peas, dates, and sugar.
Bangladesh has been witnessing a shortage of the American greenback since the Russia-Ukraine war erupted, sending the prices of commodities higher. As a result, the international currency reserves of import-dependent Bangladesh declined since the country has to pay more to buy essentials from external sources. Thus, banks don't have enough US dollars so they can't open LCs in line with the demand.
Businessmen usually open LCs two to three months before the fasting month begins to facilitate imports and meet the rising demand.
Chattogram Custom House data showed that the imports of edible oil, sugar, chickpeas, peas, ginger and onions fell between 10 per cent and 60 per cent year-on-year in the first five months of the current fiscal year, which began in July.
Importers brought in 9.48 lakh tonnes of edible oil, including crude soybean and refined palm oil, through the Chattogram port in the five months to November. It was 6.69 lakh tonnes during the same period in FY22.
About 2.17 lakh tonnes of chickpeas and peas were imported against 3.27 lakh tonnes a year earlier.
Between July and November, sugar imports stood at 1.39 lakh tonnes, way lower than the 3.15 lakh tonnes that arrived in the identical period of the previous financial year.
The import of wheat, dates and lentils, which are among the most-consumed items during the fasting month that begins in the middle of March, rose slightly.
About 1.83 lakh tonnes of dates were purchased from international markets in July-November, up from 1.42 lakh tonnes a year ago.
"The opening of LCs has become very tough. Banks are going to open LCs that are lower than what's needed. If a company like ours is in such a situation, it is easy to understand the situation others are facing," said Taslim Shahriar, senior assistant general manager at Meghna Group of Industries, one of the biggest commodity importers and processors.
The products for which LCs are opened in December will arrive in the country in February or in the first week of March. And the items against which LCs will be opened by January 15 will enter the country at the beginning of Ramadan.
So, the prices of the products might be higher before Ramadan, Shahriar said.
The central bank has asked banks to take a minimum cash advance from importers while opening LCs for essential commodities as it looks to keep their prices at a tolerable level during Ramadan and ensure smooth supply.
Importers of eight items – edible oil, gram, lentil, onion, sugar, peas, spices and dates – were initially supposed to receive the advance payment facility, also known as the cash LC margin. Later, rice and wheat were added to the list of concessions in the LC margin.
The cash LC margin should be kept at the minimum level depending on the bank-client relationship, said the Bangladesh Bank in a notice on December 11.
Shahriar claimed, "The directive has not been implemented yet."
City Group, a commodity importer and processor, is also in a similar situation.
"Due to the dollar shortage, we have been able to open LCs for less than 50 per cent of goods that are usually imported ahead of Ramadan," said Biswajit Saha, director of corporate and regulatory affairs at the group.
A meeting of the government's task force tasked with assessing the price situation of essentials is going to be held at the commerce ministry today.
Senior officials of the Bangladesh Bank, the National Board of Revenue, the public security division, the agriculture, food, industries, and commerce ministries, the Trading Corporation of Bangladesh, the president of the Federation of Bangladesh Chambers of Commerce and Industry, the Consumers Association of Bangladesh, the Bangladesh Vegetable Oil Refiners & Vanaspati Manufacturers Association, and Bangladesh Sugar Refiners Association are expected to attend the meeting, among others.
"Let's see what decisions are taken during the meeting. If LCs can be opened by January, the products can be supplied to the market before the start of Ramadan," said Saha.
Mahbubul Alam, president of the Chattogram Chamber of Commerce and Industry, said the LC margin facility for essential commodities was already there, so the new directive would not help much since it would not resolve the dollar crisis.
"There is a need to fix the dollar crisis as soon as possible and ensure the opening of LCs."
The seven products that are imported on the occasion of Ramadan will involve about $2.5 billion in import costs, commerce ministry data showed.
M Mofizur Rahman, an importer of consumer goods in Khatunganj, urged banks to treat all traders equally when it comes to opening LCs.
"Large traders can open LCs easily while small and medium traders are facing difficulties," he said.
Md Mezbaul Haque, the spokesperson of the Bangladesh Bank, declined to comment on the troubles confronting businesses while opening LCs.
Ghulam Rahman, president of the Consumers Association of Bangladesh, says consumption of a number of essentials doubles during Ramadan.
"So, the government should pay special attention so that there is no shortage of supply. A crisis can occur if there is not enough supply of essential commodities."
Rahman alleged that some traders create an artificial crisis by taking advantage of the increase in demand, raising prices and making extra profits.
"The government should strictly monitor the issue from now on," he said.
Consumers in Bangladesh have been facing a cost-of-living crisis since March as the prices of almost all commodities have gone up owing to the supply disruptions caused by Covid-19, the Russia-Ukraine war, and the global energy crisis.
Inflation surged to a 10-year high of 9.52 per cent in August before easing to 8.71 per cent in December.
"We are already in serious trouble for the hike in the cost of living. If the prices go up further during Ramadan, the suffering will only deepen," said Ismat Zerin, a resident in the capital's Uttara.
Zahid Hussain, a former lead economist of the World Bank's Dhaka office, said the inflation pain can't be understood unless one suffers from it.
"If you ask a rickshaw-puller, a tea vendor or a restaurant waiter, you will find out how anxiously they pass each night thinking about whether they will be able to afford three meals for the family members the next day, children can be sent to school, and healthcare expenditures can be afforded."
"It is a real livelihood crisis for the low-income groups and the people living below the poverty line," he said last week.