JAGARAN CHAKMA and SOHEL PARVEZ

With major indicators showing stress in the economy, there is no good news in the investment flow either as investors now prefer to stay away from taking new projects or expanding their existing capacity.

Apart from challenges such as high inflation, difficulties in import for the US dollar crisis and rising bank interest rates, growing political uncertainty has worsened investment sentiment.

This reflects a bleak prospect for job seekers and a lack of economic expansion, casting doubt over the government’s 7.5 percent GDP growth target for the current fiscal year.

Last week, the World Bank revised down Bangladesh’s growth forecast for fiscal 2023-24 to 5.6 percent as the economy is expected to remain stressed throughout the year thanks to persistent inflation and external challenges.

Entrepreneurs said private investment flows usually remain subdued ahead of any general election. This year, the economic challenges have made the situation worse.

Take the case of registration of investment proposals at the Bangladesh Investment Development Authority (Bida), which dipped in the last fiscal year.

The registration of investment proposals by local and foreign investors slumped 39 percent year-on-year compared to the July-May period of the previous fiscal year.

Bida data shows that during the July-May period of fiscal 2022-23, foreign and domestic investors placed proposals amounting to $9.4 billion in different sectors, down from $15.30 billion during the corresponding period of the previous year.

This was mainly due to a slide in investment registration by local entrepreneurs.

The lack of appetite for investment is also visible from the sharp decline in opening letters of credit (LCs) for importing capital machinery in fiscal 2022-23 and the downward trend continued this year too.

Data of Bangladesh Bank shows that LC opening to import capital machinery plunged 22 percent year-on-year to $381.8 million during the July-August period of fiscal 2023-24.

Besides, the settlement of LCs slumped 35 percent to $490 million in the first two months of the current fiscal compared to the same period a year ago.

The biggest dip in LC opening was recorded in the leather industry followed by the jute and packing sector.

LC opening for importing machinery for the pharmaceutical industry declined 65 percent. Similarly, LC opening for textile