Traders’ import capacity declines

Bangla Press Desk:   The depreciation of the taka against the US dollar has reduced traders’ capacity to import goods. At the same time, commercial banks’ single borrower exposure limits against customers’ letters of credit (LCs) have not been increased. In this situation, it has been recommended that importers be provided with additional dollars to keep the supply of essential commodities normal during Ramadan. It has also been recommended that priority be given to imports and that various duties and taxes be reduced on rice, pulses, wheat, onions, edible oil, sugar, chickpeas, peas, dates and spices.

These recommendations were made by a government intelligence agency in a report reviewing the market situation of Ramadan-related essential commodities and outlining necessary measures. As fasting will begin in winter, the report expressed concern that energy shortages could affect production-oriented industries and recommended uninterrupted 24-hour gas and electricity supply to mills and factories. The report, prepared last November, was sent to the Chief Adviser’s Office and the Ministry of Commerce. It contains 10 recommendations aimed at keeping prices of essential commodities stable during the upcoming Ramadan.

The intelligence agency’s report said that fuel demand is usually higher everywhere, including households, during winter. Due to shortages of gas and electricity at mills, production is disrupted despite installed capacity, which leads to supply shortages during Ramadan. Regarding the supply of essentials, the report noted that for import-dependent items such as edible oil, sugar and dates, it takes around three months from opening an LC to completing imports. In this context, it recommended that Bangladesh Bank be advised to arrange the required dollars and increase single borrower exposure limits for importing essential goods.

An official of a consumer goods importing company said that under central bank directives issued in 2022, the single customer exposure limit for individuals, companies or groups was capped at 25 per cent of their relevant capital. Of this, funded loans were limited to no more than 15 per cent of capital at the time of approval. At that time, the exchange rate was between Tk85 and Tk90 per US dollar. Currently, the dollar rate is above Tk120. As a result, far fewer goods can now be imported against the same exposure limit than four years ago, preventing importers from bringing in sufficient quantities.

Ten recommendations for the Ramadan market:

To keep prices and supply of essential commodities normal, the intelligence agency recommended: adjusting VAT, source tax and assessment values to reasonable levels for fully import-dependent items such as edible oil, sugar and dates; issuing necessary instructions to ports, customs stations, Chattogram Customs and transport authorities to ensure quick clearance of goods in the pipeline; recommending to Bangladesh Bank the arrangement of required dollars and an increase in single borrower exposure limits for essential imports; ensuring uninterrupted gas and electricity supply to mills to boost production in line with higher demand; formulating a joint plan involving relevant ministries and departments, law enforcement agencies, local administration, leading traders and market committees to normalise imports, supply and prices; supplying goods from mill gates at actual prices according to daily demand during Ramadan, preserving proper receipts and regularly monitoring supply; preventing illegal hoarding and price manipulation on the pretext of shortages, ensuring updated price lists are displayed, and continuing regular monitoring through mobile courts and the Directorate of National Consumer Rights Protection; expanding social safety net programmes such as TCB, OMS and Food-Friendly schemes and selling subsidised goods through temporary and mobile outlets considering the purchasing power of marginalised groups; expanding the sale of fish, milk, eggs and meat at affordable prices by the Ministry of Fisheries and Livestock in Dhaka and district towns; and recommending that the Ministry of Information and Broadcasting run positive media campaigns to prevent panic buying at the start of Ramadan.

Asked about the implementation of these recommendations, a Ministry of Commerce official said that, according to the latest information, imports of Ramadan-centric products have increased slightly and the dollar price required for LCs has remained stable. Customs duty on date imports has already been reduced, and prices have started to fall as freshly harvested onions have entered the market. The ministry has also called a task force meeting on 19 January to review commodity prices and the overall market situation.

BP/TD