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Import Contraction Hits Economy as LC Openings Fall by 27%

Economic Tag: Import

The opening of letter of credits (LCs) has dropped by 27% during the ten months to April, due to the government’s efforts to ease pressure on foreign exchange reserves. The fall in import orders is having a significant impact on local manufacturers as the supply of raw materials, capital machinery, and intermediate goods also reduced. This situation could have a domino effect on the country’s economy, causing price rises, reduced consumption, and declining production. Only petroleum imports marked a rise of 2.38%, while other types of imports dropped.

A breakdown of the data on restrictive import trade shows the opening of LCs against intermediate goods dropped by 30.39 per cent during the ten months, capital machinery as high as 56.91 per cent, industrial raw materials by 31.85 per cent, consumer goods by 18.19 per cent, machinery for miscellaneous industries by 45.59 per cent and others by 19.53 per cent. The falling import orders could impact the domestic resource-mobilization activities, negatively affecting the government’s revenue from LC-related activities. Although the current-account deficit declined during the July-March period of the current fiscal year, the domestic industry may suffer from the continuous slide in import orders.

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