LC openings dropped by 3pc in the 1st nine months of FY24

Staff Reporter :
The opening of letters of credit (LCs) has experienced a decline in the first nine months of the current financial year (2023–24), despite surpassing the $50 billion mark with a total of $50.95 billion.
In comparison, during the same period (July–December) of the previous fiscal year, the total LC openings amounted to $52.38 billion, reflecting a decline of nearly 3 percent year-on-year, attributed to the ongoing forex crunch and import restrictions.
Similarly, from July to February of FY24, LC openings declined by almost 5 percent compared to the corresponding period in the previous fiscal year, FY23, dropping from $46.43 billion to $44.47 billion, as reported by Bangladesh Bank data.
According to the central bank’s statistics, the opening of import LCs for consumer goods decreased by approximately 18 percent from July to February of the current financial year compared to the same period in the previous financial year.
LC openings for capital machinery, intermediate goods, and industrial raw materials also saw declines of 19 percent, 17 percent, and 4 percent, respectively, during this period.
Over the past year, there were only three instances where import LCs exceeded $6 billion. Experts attribute this decline in LC openings to the government’s stringent measures aimed at conserving foreign currency reserves during the current fiscal year.
They noted that in the current month, LC openings are expected to decline due to the factories and banks closing for an extended period of Eid celebration. Although
in March, the opening and settlement of import letters of credit (LCs) saw a notable increase compared to February.
According to Bangladesh Bank data, the opening of LCs was $5.22 billion in February 2024, $6.33 billion in January 2024, and $5.39 billion in December 2023.
LC However, during the July–February period of the current financial year, settlements have decreased by approximately 14 percent compared to the same period in the previous financial year.
Meanwhile, the Bangladesh Bank sold $11.67 billion from its forex reserves to banks in less than 10 months of the current financial year of 2023–24.
During the period of July to December this fiscal, the amount of dollar depletion was $6.7 billion, and the figure crossed $11 billion on April 22, according to the data from the central bank.
Simultaneously, private sector credit is also declining due to problems in opening LCs, which have a negative impact on the economy, businesses, and employment generation.