Staff Reporter :
The settlement of letters of credit (LCs) for products such as consumer goods, capital machinery, intermediate goods, and petroleum decreased by 8.23 percent year-on-year in the financial year 2023-24, casting a shadow on the growth of the overall economy.
According to Bangladesh Bank (BB) data, LC settlements totaled $66.05 billion in FY24, down from $72 billion in FY23. This decline is attributed to the pressure of deferred LC payments, as banks have reduced the opening of deferred LCs to avoid exchange rate risks.
Banks are currently selling dollars at a rate of Tk121-122 to settle LCs, while remittance dollars are being collected at a maximum rate of Tk119.50.
Businessmen and economists cited the dollar crisis, credit tightening, and global economic headwinds as factors behind the drop in LC settlements. They noted that private investment has stalled, affecting overall job creation. The government has taken various measures to control the imports of luxury and unnecessary goods due to the dollar crunch.
Moreover, Bangladesh importers opened $68.19 billion worth of LCs in FY24, which is a marginal increase of 1.85 percent from the previous year, according to central bank data.
However, a sector-wise analysis of import figures shows that LC openings for consumer goods decreased by 12 percent in FY24, capital machinery fell by 11 percent, intermediate goods by 18 percent, and petroleum by 4 percent compared to the previous fiscal year. On the other hand, imports of other products increased by 13 percent.
During the fiscal year 2022-23, the amount of LC openings was $66.95 billion, whereas it was recorded at $90.43 billion in FY 2021-22.
The central bank tightened imports due to a dollar shortage in the market since mid-2022. Measures included maintaining a 100 percent LC margin for opening import LCs and discouraging the import of luxury goods, leading to a fall in imports. Additionally, the regulator sold significant amounts of dollars from reserves to stabilize the forex market.
However, these restrictions have impacted the import of capital equipment and raw materials, thereby affecting industrial units.