In the first nine months of 2023, Bangladesh witnessed a significant decline in both cotton and yarn imports, as reported by the Bangladesh Textile Mills Association (BTMA). Industry leaders attribute this downturn to a confluence of factors, including diminished global and local demand, inconsistent gas supply, and the ongoing US dollar crisis.
According to BTMA data, cotton imports for yarn production experienced a sharp 28% year-on-year decrease, plummeting to 9.87 lakh tons from 13.66 lakh tons during the same period the previous year. Similarly, yarn imports recorded a substantial 26% decline, falling from 8.51 lakh tons to 6.29 lakh tons in the nine months leading up to September.
Matin Chowdhury, Managing Director of New Asia Group and former President of BTMA, highlighted the adverse impact of high gas and cotton prices, coupled with the escalating US dollar rate, leading to substantial losses for textile mills. In January, the government raised gas prices by 14.5% to 178.9% to alleviate the unsustainable subsidy burden, further exacerbating the challenges faced by the industry.
The depreciation of the taka against the US dollar, amounting to nearly 30% since January of the previous year, has intensified the cost of imports, as indicated by central bank data. Local spinning and weaving mills, responsible for fulfilling approximately 90% of the raw material requirements for export-oriented knitwear—the largest export segment in the apparel industry—find themselves grappling with a dire situation. These mills also cater to 40% of the demand for woven garments.
Monsoor Ahmed, CEO of BTMA, emphasized the difficulties faced by export-oriented mills in accessing the Export Development Fund (EDF) for cotton and yarn imports due to a shortage of dollars. The Bangladesh Bank’s decision to increase interest rates on loans aims to make borrowing costlier, an attempt to conserve foreign currencies amid a 25% decline in forex reserves since the onset of the Russia-Ukraine war.
The woes extend to domestic market-oriented spinning mills, which heavily rely on banks for procuring raw materials from international markets. Consequently, several local market-oriented mills have suspended production due to raw material shortages, leading to a challenging situation acknowledged by BTMA President Mohammad Ali Khokon.
With export orders for garments dwindling and the market not expected to return to normalcy before March of the following year, industry leaders appeal for government and banking support to weather the storm. Mohammad Hatem, Executive President of the Bangladesh Knitwear Manufacturers and Exporters Association, underscores the gravity of the situation, noting that the cotton import data mirrors the current state of the sector.
