B Mirror Report: In the first half (H1) of the current fiscal year, Bangladesh’s imports of capital gear saw yet another steep drop, officials and observers say, reflecting a lengthy period of stagnation in investment and a sustained deterioration in private-sector confidence.

According to data from Bangladesh Bank (BB), capital machinery imports decreased 16.06 percent year over year to US$904.59 million from $1.077 billion in the same period of the previous fiscal year during the July–December period of FY2025-26.

Sluggish investment activity and poor industrial growth nationwide are the key causes of the ongoing negative trend, according to economists. It is clear from the decline that companies are still hesitant to take on new projects or increase their output.

Although actual settlements for machinery imports declined, BB statistics reveal a modest improvement in the opening of fresh letters of credit (LCs) during the early months of the fiscal year. However, despite higher LC openings, overall import payments failed to keep pace with the previous year.

According to central bank data, local entrepreneurs opened LCs worth $1.079 billion for capital machinery imports during July–December of FY2025-26, marking a 23.64 per cent increase compared to $872.82 million in the corresponding period of FY2024-25. Even so, settlements continued to register a negative trend.

BB officials and economists noted that investment has yet to rebound to expected levels under the interim government, keeping capital-machinery imports under pressure. They expressed optimism, however, that demand for industrial machinery could pick up once an elected political government assumes office following the national polls scheduled for February 12.

Business leaders said the ongoing slowdown in economic activities is weighing heavily on business expansion plans and job creation. Industry insiders and analysts described the contraction as a clear sign of a fragile investment environment.

At the same time, imports of intermediate goods declined by 13.05 per cent to $1.91 billion in the first half of the current fiscal year, down from $2.199 billion a year earlier, amid slower activity in secondary manufacturing sectors such as yarn, chemicals and accessories.

In contrast, raw material imports remained largely unchanged. BB data show imports worth $1.188 billion during July–December of the current fiscal year, slightly below $1.191 billion in the same period last year, as existing factories continued operations to fulfill ongoing orders.

Bankers pointed out that despite relative stability in the exchange rate and sufficient dollar liquidity in the banking system, many entrepreneurs are reluctant to invest in new ventures or factory expansions. They also cited higher borrowing costs, driven by an elevated policy rate aimed at curbing inflation, as a major deterrent to large-scale industrial investment.

Business representatives further highlighted concerns over uninterrupted supplies of gas and electricity, which have discouraged new manufacturing initiatives. As a result, many investors have adopted a “wait-and-see” stance, postponing capital-intensive decisions until there is greater political and regulatory certainty.

Economists view capital-machinery imports which include factory equipment, industrial tools and production lines as a key leading indicator of economic momentum. While remittance inflows and garment exports have shown resilience, stagnation in the manufacturing sector could dampen overall economic growth. The World Bank recently projected Bangladesh’s GDP growth at 4.6 per cent for the current fiscal year.

Analysts cautioned that Bangladesh would find it difficult to sustain industrial competitiveness in the absence of a resurgence in capital-machinery imports, especially as it gets ready to leave the Least Developed Country (LDC) category in late 2026.

Additionally, according to BB statistics, capital-machinery imports fell from $2.34 billion in FY2023–2024 to $1.745 billion in FY2024–2025, a 25.41 percent decrease.

Rising foreign exchange reserves, according to central bankers, have allowed commercial banks to open LCs for imports on demand, suggesting that a lackluster appetite for investment is more to blame for the current decrease than foreign exchange restrictions.