Bangladesh economy faces severe stress as industrial production stagnates

Dhaka, Dec 24 (Representative) Months after the “student uprising” that led to the ouster of Prime Minister Sheikh Hasina, Bangladesh’s economy has taken a downward spiral leading to a massive drop in industrial production. This has led to over a million people being unemployed, and many domestic industrial establishments, large and small, shutting down owing to a severe liquidity crisis. The lingering political instability, rising Islamic radicalism, inflation, and security situation has prevented various entrepreneurs, particularly struggling ones, from obtaining new Lines of Credit for sustaining their trade. Entrepreneurs report difficulties in securing loans due to liquidity shortages in banks and elevated interest rates. The implementation of contractionary monetary policies has exacerbated these issues, making debt repayment increasingly challenging and contributing to a rise in non-performing loans, media reports said. The garment sector, which is the country’s economic backbone, has also suffered, as various buyers, domestic and international, have shut down offices due to security tensions and economic uncertainty.

The country’s inadequate infrastructure coupled with the political instability has also led to labour unrest, particularly in the ready-made garment (RMG) sector, which accounts for approximately 80% of Bangladesh’s total exports. Frequent worker dissatisfaction and protests have created an environment of uncertainty, deterred investment and disrupting industrial operations. Major fashion brands are diversifying their sourcing, reducing reliance on Bangladesh by up to 30%, and shifting to countries like Cambodia and Indonesia. This shift poses a significant threat to Bangladesh’s position in the global supply chain. According to the Daily Sun, Bangladesh’s import sector is facing a lot of stress, with raw material imports in November 2024 declining to $527 crore from $560 crore during the same period of the previous fiscal year, resulting in stagnation in Bangladesh’s trade and commerce. Furthermore, the industrial sector is also facing a severe gas shortage, disrupting production across factories.

Factories in Gazipur, Narayanganj, Narsingdi, and Savar report that inadequate gas supply has halved their production. Low gas pressure often forces factories in these areas to shut down intermittently. For several weeks, inadequate gas supply has caused output in key sectors like ceramics, steel, and textiles to drop by nearly half. Industrial entrepreneurs in the country warn that the gas crisis has pushed the sector into turmoil, leading to the shutdown of hundreds of factories over the past few months. This has resulted in declining export earnings, stalled investments, and stagnated employment growth. Putting strong emphasis on tackling the gas crisis, they have added that without resolving the gas and power supply issues, economic growth will stall, domestic production will further decline, and even exacerbate the already strong shortage of dollars. So far, the drop in production has already reduced imports of industrial raw materials by 9.81% and letters of credit (LoC) for machinery imports by 41%, the reports said.