Originally posted in The Financial Express on 30 March 2023
Austerity saves forex but at NBR’s cost
Import of 135 non-essential and less-important products plummets
Imports of 135 products plummeted 52 per cent in volume and 41 per cent in value during the last nine months following the imposition of prohibitive duties to save Bangladesh’s falling forex reserves.
FE
Official statistics show government revenue from these imports, categorised as non-essential and less-important at this hour of crisis worldwide, also contracted substantially.
Market demand as yet for some of the products-whose prices have spiraled for import against cent-percent LC margin-stands out as a symbol of income disparity in society in the eye of economists.
The items include fresh fruits, fresh flowers, cosmetics and furniture which the government defined as less important to import in this situation of dollar crisis.
Until March 29, 2023, country’s foreign-exchange reserves had declined to US$ 31.05 billion from $33.86 billion on December 1, 2022, according to Bangladesh Bank sources.
To discourage import, the National Board of Revenue (NBR) imposed on May 24, 2022 Regulatory Duty (RD) of up to 20 per cent on those products.
The import volume of those products had declined to 433,331.39 tonnes worth Tk 34 billion since May 24, 2022 till February 28, 2023, according to customs data.
With the fall in import the import-tax collection from the products also plummeted to Tk 29.86 billion from Tk 42.33 billion in the corresponding period.
The country imported some 899,167.92 tonnes of fresh fruits, flowers, cosmetics and furniture, spending Tk 57.56 billion, in the corresponding period of previous year (from April 21 to May 23, 2022).
An FE analysis, based on customs data, finds that the volume of import of fresh fruits occupies major share worth Tk 23.21 billion with the import of 419,104.89 tonnes.
However, import volume of fresh fruits dropped in the last nine months by 50 per cent from 869,784.98 tonnes valued Tk 41.19 billion in the corresponding previous period.
Market operators said there is still huge demand for imported orange, apple and grapes on the local market, especially in the ongoing month of Ramadan.
Of the imported fruits, 143,480.57 tonnes of oranges priced Tk 7.54 billion and 121,677.69 tonnes of apples worth Tk 6.18 billion had been imported between May 24, 2022 and February 28, 2023.
A total of 49,882.87 tonnes of fresh grapes were imported at a cost of Tk 4.09 billion. Some 29,102.63 tonnes of mandarins (including tangerines and satsumas) were imported for Tk 1.15 billion in the last nine months.
Imports of oranges, apples, mandarins and grapes were 1282.77 tonnes wroth Tk 9.71 billion, 1124.29 tonnes worth Tk 8.71 billion, 173.23 tonnes valued at Tk 1.28 billion and 138,128.13 tonnes worth Tk 6.88 billion respectively.
Economists, however, are of the opinion that the demand for such large volumes of costly fruits is one of the indicators of “income inequality as a vast majority has been compelled to switch to ‘compromised diet’ excluding fish and meat”.
Recent research findings by the Center for Policy Dialogue (CPD) showed household expenditure on purchase of food for a four-member family in Dhaka increased by 25 per cent this year compared to that of last year.
Dr Fahmida Khatun, Executive Director of CPD, said there are many cases where it is evident that low-and fixed-income group of people are compelled to switch into compromised diet.
“Definitely, it shows income inequality in the country. High prices do not affect the buyers of imported fruits. Many of them probably look at the price tag!” Dr Fahmida said on a note of exclamation.
Managing Director and Chief Executive Officer of Energy Pac Power Generation Limited Humayun Rashid noted that import of fruits sometimes enjoys the privileges on opening letter of credit rather than import of spare parts for manufacturing industries.
“Perhaps, influential quarters are involved in the import of fresh fruits,” said Mr Rashid, who is also President of the International Business Forum Bangladesh (IBFB).
Opening LC for spare parts requires depositing up to 120-percent full cash margin in recent times, he added.
In a market review, this correspondent has found no sign of short supply of imported fresh fruits like apple, orange, grapes in the city markets, though prices are so high.
Md Sirajul Islam, President of Bangladesh Fresh Fruits Importers Association, said common people cannot buy the imported fruits for exorbitant prices after the increase in import taxes.
“Demand is there, so we are importing fruits paying higher taxes,” he told this correspondent.
Import of fresh fruits declined compared to that of previous period as purchasing capacity of a vast majority got eroded, he said about the fallout from inflation.
Explaining the reason for availability of fresh imported fruits, he said, “Unsold fruits are prominently visible in the market.” Import of fruits needs 100-percent cash margin for opening LC and importers are making cautious step on import due to high taxes, he said.
The government received Tk 21.73 billion in import taxes against fresh fruit imports against Tk 30.85 billion in the corresponding period, customs data revealed.
Apart from fruits, the country imported fresh flowers, including roses, carnations, orchids, chrysanthemums and lilies, weighing about 40.39 tonnes worth Tk 10 million until March 1, 2023. In the corresponding period previous year, some 479.37 tonnes of fresh flowers worth Tk 28 million were bought in.
The country spent Tk 9.37 billion on import of cosmetics of about 11,529 tonnes until February 28, 2023, after the imposition of the prohibitive duty taxes. Some Tk 1.38 billion has been spent to import beauty makeup, skincare products under HS code 33049900 while Tk 300 million spent for importing shampoos weighing about 758.44 tonnes.
During the period, some 2,656 tonnes of foreign furniture was imported by spending Tk 1.39 billion. Metal, wooden and cane furniture occupy the major share of imported furniture.