FROM PAGE B1

Most of the firms have blamed the higher energy costs, an elevated level of raw material prices and the currency depreciation for the hit to the profit.

“The industrial sector is not getting enough gas. Still, the government is raising its price,” said Mohammad Ali Khokon, president of the Bangladesh Textile Mills Association.

“Why are you increasing the price if you can’t supply enough gas?” he questioned.

“The investment environment is deteriorating day by day.”

The entrepreneur said loans from the central bank’s Export Development Fund (EDF) have been made costlier as the BB has raised the interest rate of the scheme, which relies on the reserves.

Established in 1989, the EDF helps manufacturer-exporters access the programme for input procurements from international markets.

“The US dollar is costlier when exporters need to import raw materials but its price is lower when they encash them,” Khokon said.

Banks buy each greenback for Tk 110.5 from exporters and sell it to importers for Tk 111.

“How will industries survive in this situation?” he said.

The government is also going to introduce an automatic fuel pricing mechanism to comply with one of the conditions of the $4.7 billion loans given by the International Monetary Fund (IMF). The IMF suggests the adoption of the automatic pricing to curb subsidies enjoyed by people irrespective of their incomes and ensure targeted support for the poor.

This means if the prices go up in the international market, they will automatically increase in the local market and vice versa.

But Anwar-ul Alam Chowdhury, a former president of the Bangladesh Garments Manufacturers and Exporters Association, questioned whether the price will fall when it comes down in the international market.

“The experience in Bangladesh is different,” he said, pointing out that the prices don’t fall in Bangladesh immediately after they decline in global markets whereas any upward adjustments take place instantly.

He also said it has to be seen whether local companies can cope with an automatic price adjustment of energy.

Chowdhury said the cost of production has already risen for industries whereas the demand for goods in the local market fell amid escalated consumer prices, which rose to a 12-year high in FY23.

Inflation has been running high at more than 9 percent since March last year as well.

“Due to higher inflationary pressures, people are spending less on non-food items. If the cost of living goes up further, retail sales will drop too,” Chowdhury said.

He said the Bangladesh Bank has taken a contractionary monetary policy stance to rein in inflation and made funds costlier.

“Banks are investing in treasury bonds instead of lending to industries as the yields against the former are higher. Under the circumstances, it will be a big challenge for many companies to survive.”

Economists say the government has no other option but to reduce subsidies as tax collections have remained low while expenditures are climbing. So, they recommend businesses and industries enhance productivity and competitiveness.

“Owing to the price hike of electricity, the production cost of the manufacturing sector will rise. Therefore, it may impact the price level and stoke inflationary pressures,” said MK Mujeri, a former chief economist of the central bank.

He said the government has a logic behind the price spike since the subsidy spending has gone up to a significant level whereas revenue receipts have remained low, hurting development expenditures.

The former director-general of the Bangladesh Institute of Development Studies says the electricity sector requires a huge subsidy due to some wrong policy decisions of the government.

He said significant capacity payments made to private power producers and allowing rental and quick rental power plants to operate for a long time have raised the overall costs of electricity generation.

According to the economist, the price adjustment should be slow so that people don’t feel much pains.

There are allegations that the government has to spend more in implementing development projects owing to graft, Mujeri said.

“People are suffering for the wrong policies of the government and corruption.”

He urged the government to put in place proper policies and curb corruption.