The absence of new investment and a downtrend in private credit growth caused by a crisis in the banking sector dragged down imports of capital machinery. Bangladesh’s garment and textile machinery imports fell 11.04 per cent in the last fiscal year. Overall imports of capital machinery fell by 9.43 per cent. Imports of textile machinery fell 18.40 per cent while garment machinery imports plunged 3.52 per cent.
Since no significant change took place in innovation, there was no capacity expansion in the apparel industry. In addition, the production cost rose significantly, especially after the increase in minimum wages in 2018. This rise in the production cost has impelled apparel makers to instead import yarn and fabrics. Also, the crisis in the banking sector created a cash crunch, hindering new investments. Deepening problems in the country’s financial sector hindered private investment for new projects or expansion. Businesses are wary about expansion as they already have unused capacity. A huge amount of fabrics and yarn has remained piled up at warehouses in the country’s primary textile sector. Election uncertainty was another reason for the slower private investment. Investors were cautious about opening new letters of credit to import machinery for new investment fearing it would delay the implementation of projects.