Bangladesh's economic situation continues to reflect strain as recent reports reveal troubling losses for local businesses alongside shifting banking dynamics. One notable example is Maksons Spinning Mills PLC, which announced a staggering loss of Taka 40.75 crore (approximately $4.8 million) for the first quarter of the current fiscal year. This marks a shocking 61 percent increase in losses compared to the previous year’s figures, as high raw material costs and financial charges consolidate to hinder the firm’s performance.
According to financial statements released by the company, the losses stem from multiple sources. Increased raw material costs coupled with rising salaries and utility expenses have compounded the financial struggle. Maksons reported sales of Taka 95.77 crore (around $11.3 million) for Q1, marking a steep 19 percent decline year-on-year, attributed largely to reduced sales volumes and pricing pressures.
The net operating cash flow per share (NOCFPS) also paints a grim picture. For the July to September 2024 period, it recorded Taka 3.51 in the negative. This is significantly worse than the Taka 0.74 published for the same period last year, underscoring how climbing costs and additional expenses are pressing the company’s financial margins. Notably, the net asset value (NAV) per share decreased to Taka 10.62 as of September 30, down from Taka 12.29 just three months prior. This consistent decline is closely tied to operational losses sustained during the quarter.
Established in 2003 and converted to public limited status two years later, Maksons operates with 100,680 spindles, utilizing machinery sourced from countries like Japan, China, India, and Italy, among others. The company, which specializes in high-quality yarn production for export, has an annual production capacity estimated at 21.25 million kilograms, offering various products inclusive of cotton and organic yarns.
Meanwhile, the broader economic picture reveals shifting liquidity within the banking sector. After months of what was referred to as "mattress money"—excess cash held outside formal banking systems—there is evidence of gradual recovery as customer trust begins to rebuild. Central bank data indicates cash outside banks fell by Taka 5,743 crore (around $680 million) just in October, concluding the month with Taka 2.78 lakh crore. While still 13 percent higher than last year, this decrease shows potential stabilization.
Bankers attribute this decline to improvements stemming from the interim government’s recent efforts to restore customer confidence and mitigate financial irregularities. At the end of September, cash outside banks was recorded higher at Taka 2.84 lakh crore, nearing Taka 2.90 crore prior. The fluctuations coincide with political unrest, which has historically hindered economic movements.
Economists caution against the economic repercussions of excess liquidity, arguing it can impede monetary circulation and slow down money creation. A return of funds to banks may facilitate increased liquidity and encourage investment activities. Sheikh Mohammad Maroof, managing director of Dhaka Bank, expressed optimism, stating, "Political instability, inflation, and irregularities have eroded customer confidence. Yet, the inflow of funds observed confirms trust is on the mend as banks actively engage to improve services and encourage new accounts."
The downward trend of excess cash is compounded by inflationary pressures. The cash outside banks reached its peak at Taka 2.92 lakh crore back in July 2024, which followed significant civil unrest and restricted banking operations during the previous months. Even with these challenges, it has been claimed by observers, including the interim government, which considers its performance significant enough to contribute to correcting prior imbalances.
Deposits revealed positive growth as well, rising by 7.28% year-on-year, with bank deposits reaching Taka 17.55 lakh crore by the close of October. This uptick reflects confidence restoration as deposit growth gradually picked momentum, standing at 7.26% for September and previously dipping to 7.02% for August—a period where confidence was particularly low.
Despite the prevailing uncertainties, numerous officials from various banks reported they have witnessed considerable deposit growth at reputed banks. A managing director negotiating under anonymity noted how customers are shifting their priorities. He remarked, “Previously, interest rates enticed them. Now, customers are discerning, seeking financial health over mere rates, benefiting all parties involved.”
This trend of increased scrutiny has led some banks to adjust their operations, promoting practices with stricter oversight. The gradual return of customer confidence amid these shifts suggests potential recovery for the broader Bangladeshi economic environment.
To summarize, the interplay of the alarming losses reported by companies such as Maksons with the resurgent banking environment reveals much about the current economic climate of Bangladesh. Continuing developments will be pivotal as factors such as political stability, inflation management, and confidence rebuilding come to the forefront.
