- Consumer goods giants – the priority clients for any bank in regular times – are not getting dollars to import essentials, widely used in Ramadan, prompting them to seek the intervention of the commerce ministry.
According to The Business Standard article published on February 19, 2023, City Group, a leading consumer goods manufacturer and importer, recently approached 28 banks to open letters of credit (LCs) to import commodities for the upcoming Ramadan, but failed to secure the required funds as all 28 banks turned them down citing dollar crunch.
Fazlur Rahman, chairman of the group, said in a letter to the commerce ministry that it needs $423 million (Tk4,441cr @ Tk105 per dollar) to import 7.23 lakh tonnes of goods, including sugar, edible oil, wheat, chickpeas, soybean seeds, etc, but it cannot open LCs for import of these goods.
Another major consumer goods importer, Meghna Group of Industries (MGI), has also raised concerns over the shortage of dollars for imports, and has sought assistance from both the commerce ministry and the Bangladesh Bank.
If the import hurdles do not ease soon, both companies warned that the supply of goods may be disrupted during Ramadan, which begins in the third week of next month.
"I have written to the commerce ministry and the Bangladesh Bank requesting them to help us import essential goods to meet demand. The central bank passes it to the private banks, which say the Bangladesh Bank does not give them dollars," said Mostafa Kamal, chairman and managing director of MGI.
He said MGI and City import bulk amounts and they need $20 million to $30 million for one import consignment.
However, Director General of the Directorate of National Consumer Rights Protection AHM Shafikuzzaman said the stock and supply of products are good based on the information the authorities have.
"Before Ramadan, businessmen will raise various issues and try to show problems. But there is nothing to worry about. From import to marketing, we are monitoring everything strictly," he told The Business Standard.
Abdus Salam Azad, managing director of Janata Bank, one of the 28 banks that the City Group said was unable to open an LC, told The Business Standard, "The Gandaria branch of the Janata Bank is opening LC for the City Group as per their capacity. So, if it is said that LC is not being opened, it is not true."
He also said, "We are regularly opening LCs for the import of consumer goods. The Bangladesh Bank is also giving maximum support in this regard. We hope there will be no shortage of essential goods in Ramadan."
Ahead of Ramadan, which falls in the last part of March, traders have been trying to import essential products since October and November last year. But the dollar crunch has led imports of various consumer goods, including oil, sugar, pulses, chickpeas and dates, into hitting rock bottom from October to December last year. LC openings in these three months of 2022 were much lower year-on-year.
Meanwhile, according to Bangladesh Bank data, the import of consumer goods in the first seven months (July-January) of the current fiscal year has decreased by 18.2% year-on-year.
While the government is repeatedly saying that instructions have been given to open LCs on a priority basis for imports of essential commodities, importers continue to complain that the directive is not being followed.
With demand for oil and sugar doubling during Ramadan, consumer goods suppliers and marketers prepare in advance every year to meet the additional demands. This year, the dollar crunch triggered by the Russia-Ukraine war has severely affected imports and hampered this preparation. Commodity prices, which tend to soar ahead of each Ramadan, have shot up way early this year as the war shocks have also disrupted supplies of consumer goods.
Officials of the Directorate of National Consumer Rights Protection and the Tariff Commission say that the price of import-dependent consumer goods is expected to increase by 25-30% due to the devaluation of the currency.
However, prices of some products have already soared even more. Now, there are concerns of a fresh hike in prices on grounds of the persisting crisis.
There is already a supply shortage of sugar in the market. The government has fixed the price of packaged sugar at Tk112 per kg. But sugar at this price is not available in any store. In fact, loose sugar is being sold at Tk120-125 – higher than the price set by the government.
Traders say sugar import has remained disrupted for 4-5 months, which is why the price of sugar is high. The supply of sugar packets in retail shops is anywhere from low to none at all.
At a recent FBCCI programme, traders said that the supply and price of consumer goods will remain stable in the coming Ramadan if the LC situation eases and uninterrupted gas supply is ensured.
Oil and sugar wholesalers said on the occasion that although government set prices are shown in sale vouchers from mills, they basically charge higher.
A senior official of Meghna Group, requesting anonymity, told The Business Standard, "A big crisis is unlikely in Ramadan, but at the same time there is no chance of avoiding the crisis at all. Although the LC situation has just started to improve a little, it is not enough for normalcy to return."
The officials also pointed out that the gas supply also left a major impact on market conditions.
Meanwhile, in the first week of February, the prices of crude soybean oil, crude palm oil, lentil and gram decreased by 15%, 34.34%,13.36% and 7.32% respectively in the international market year-on-year, according to the commerce ministry data.
In other words, prices have fallen even more than they were before the Russia-Ukraine war. But consumers are not able to derive any benefit from the reduced prices. On the contrary, everything is pricier in the country's market.
A comparison of product-wise LC settlement data for July-December of 2021 and 2022 shows that sugar import in the six months of 2022 decreased by about 2.08 lakh tonnes year-on-year. Import of crude palm oil also decreased by 1.32 lakh tonnes while imports of gram and dates decreased by 14,000 tonnes and 389 tonnes respectively.
Both the imports and the number of LC openings have decreased. Comparison of LC data for October, November and December of last two years show that import LC decreased for 1,50,000 tonne sugar in 2022 – it dropped the most in November and December.
Similar import decline happened for soybean oil, which is imported as crude, refined and soybean seed. LC opening for crude soybean import decreased from 1.67 lakh tonnes to 88,000 tonnes.
According to Bangladesh Bank data, LC opening of several commodities has decreased in the first 7 months (July-January) of the current financial year. Of them, LC openings for the import of rice and wheat dropped by 5.63 %, sugar and salt by 13.93%, dairy products by 11%, all kinds of fruits by 40%, and pulses by 10.13%.
However, the amount of LCs opened for refined and crude edible oil increased.
