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Rising global uncertainty triggered by the Iran war has placed Bangladesh’s external trade under pressure, as imports of essential goods and industrial raw materials have declined until April this year.
Businesses said volatility in global markets, a dollar shortage and higher shipping costs have cut imports and pushed large industrial groups into losses. Analysts warned that the trend could drive up prices of essentials and hurt industrial output.
Sources said major business groups have reduced imports, forcing many firms to pause new purchase orders and investment plans. The war has fuelled a cost-push crisis in industry, as energy shortages, higher raw material prices and rising import costs squeeze production.
Banks have failed to supply adequate dollars in many cases and have delayed opening letters of credit, traders said. Disruptions in global supply chains have also affected imports of food and agricultural products. High dollar rates and prolonged conflict have led several large industries to scale down production or defer expansion plans.
A review of reports from different agencies showed that reduced imports due to the war and global uncertainty could cut the country’s real GDP by 1.2%. The export sector has also started to feel the impact, with export earnings in March dropping by nearly 18 percent compared with the same period last year.
Industry insiders warned that prolonged conflict could cut industrial production by up to 50 percent, especially in the garment sector, due to shortages of gas, fuel and raw materials.
Fazlul Haque, former president of the Bangladesh Knitwear Manufacturers and Exporters Association, said purchase orders have declined while production costs continue to rise. He warned that a prolonged conflict in the Middle East could worsen the crisis. He urged authorities to ensure uninterrupted energy supply, keep interest rates at a reasonable level and provide quick policy support to help industries recover.
Stakeholders said the rate of opening letters of credit for essential goods and industrial raw materials has declined, as large businesses have adopted a cautious approach. More than half of the raw materials used in Bangladesh’s plastic industry come from Middle Eastern countries. Industry players claimed that prices of plastic raw materials have surged by over 40 percent due to the conflict, which has reduced imports and forced many firms to cut production or raise prices to adjust costs.
Imports of essential goods have also suffered. Traders said lower edible oil imports have pushed up soybean and palm oil prices in Chattogram’s Khatunganj market. Refiners have already proposed a price hike to the government to offset losses.
Officials at the Ministry of Commerce confirmed that they have received the proposal and said Commerce Adviser Khandaker Abdul Muqtadir will hold a meeting with stakeholders on Sunday to review the issue.
Despite a ceasefire announcement between the United States and Iran, uncertainty persists over the Strait of Hormuz after intensified Israeli attacks in Lebanon. Iran has warned it may keep the strait closed if attacks continue, raising fears of further disruptions in global trade routes.
Economists warned that continued conflict could further disrupt imports of raw materials and essentials, while remittance inflows from Middle Eastern countries such as Bahrain, Jordan and Iraq have already started to decline. They said worsening working conditions, shrinking labour markets and irregular income could disrupt remittance flows in the long term.
Experts said falling exports and remittances could increase pressure on foreign exchange reserves and weaken the local currency, affecting the balance of payments.
The World Bank, in its latest Bangladesh Development Update, warned that the Middle East conflict could affect trade, remittances and currency stability, while also slowing consumption, investment and GDP growth. It also cautioned that higher fuel and transport costs could push inflation further up.
Abdur Rahim Khan, additional secretary (export) at the Ministry of Commerce, said the government recognises the negative impact of the Middle East conflict on trade and has taken steps to address the challenges. He added that authorities will consult stakeholders and take further measures if needed.
https://thedailyexpress.news/news/business/1f135652-e221-62b0-b367-80eae2fbbd6a