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Import costs go up with oil price rise

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The country's spending on imports increased slightly in November, lifted by an uptrend in petroleum prices in the international market.

The coronavirus vaccines rollout in the United States and the United Kingdom has also pushed up the oil prices in the international market, officials said.

The opening of letters of credit (L/Cs), generally known as import orders, grew by nearly 8.0 per cent to US$4.13 billion in November 2020 from $3.83 billion a month ago, according to the central bank's latest data.

Similarly, the settlement of L/Cs, generally known as actual import, in terms of value, increased by more than 9.0 per cent to $3.64 billion in November from $3.34 billion in the previous month.

The import orders for petroleum products jumped by nearly 47 per cent to $128.17 million in the month of November from $87.41 million in October 2020, the Bangladesh Bank (BB) data showed.

"Import expense for petroleum products has increased recently following the rising trend in crude oil prices in the global market," a senior official of the state-run Bangladesh Petroleum Corporation (BPC) told the FE on Sunday.

The BPC official also said the prices of crude fuel  oil increased by $3.0 to $4.0 a barrel over a month and was quoted at $45 November. The uptrend has been continuing as Covid-19 vaccination is in progress in the USA and the UK. The per barrel Brent crude was quoted at $55 barrel on December 17 last.

Crude oil prices came down to the lowest level of $19.33 on April 21 this calendar year because of the coronavirus pandemic, international media reported.

"Restoring connectivity globally along with positive news of coronavirus vaccine has helped increase fuel oil prices in the global market," said the official of the BPC, the key public agency for imports, production and supply of petroleum products, said in a note.

Meanwhile, the US investment bank and financial service company - Goldman Sachs - expects Brent crude oil to reach $65 a barrel next year following the release of an effective Covid-19 vaccine and a limited increase in supply from OPEC+.

In 2016, the OPEC allied with other top, non-OPEC, oil-exporting nations to form an even more powerful entity named OPEC Plus.

Talking to the FE, a BB senior official said the prices of fuel oil and stocks have increased in the global market after the vaccination started in the USA and the UK.

"The higher oil prices in the global market will not impact the local market as Bangladesh follows the administrative price policy on fuel oils," the central banker said.

But the government's budget expenditure will go up further if the rising trend in oil prices in the international market continues, he added.

Meanwhile, the actual imports of fuel oils rose by nearly 39 per cent to $151.15 million in November from $108.97 million a month before.

"The upward trend in import expense for fuel oil may continue until March 2021 due to the seasonal effect," the BPC official predicted.

On the contrary, the opening of L/Cs for back-to-back import of textiles products dropped further in November as apparel exporters scaled back purchase of raw materials by deferring shipments from one to two months due to the second wave of coronavirus in the US and Europe, Bangladesh's key export destinations.

The import orders for textiles products fell by nearly 3.0 per cent to $420.02 million in November from $431.43 million in the previous month.

"The existing trend in import orders for ready-dame garment (RMG) products may continue three months more because of the second wave of the Covid-19 pandemic," Fazlul Hoque, former president of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), told the FE.

Mr. Hoque, also managing director of Plummy Fashions, added the placing of fresh orders for RMG products has already slowed down for the same reason.

Talking to the FE, Sayeed Ahmad Chowdhury, general manager of Square Denims, said up to 15 per cent export orders have been deferred during the period as the second wave of coronavirus infections hit different parts of the world.

"The buyers, particularly from Europe, are now following a 'go slow policy'," Mr. Chowdhury noted.

Higher import of chemicals and chemical products also helped increase the overall imports last month.

Import orders for chemical fertilisers rose to $171.68 million in November from $140.86 million a month before while the actual imports of the agriculture input stood at $162.79 million from $78.02 million, the BB data showed.

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