July LC opening slumped by 31pc
Staff Reporter :
The opening of letter of credit (LC) for imports plunged by about 31 per cent year-on year in the first month (July) of the current financial year of 2023-24 due to the shortage of US dollars and restrictions on the purchase of non-essential items from external sources.
Private and public entities opened LCs of $4.32 billion in July, which was $6.35billion in the same month a year ago, according to data from the Bangladesh Bank.
Besides, settlement of letters of credit (LCs) also decreased by 20.14 per cent in the last month.
Earlier, in June of the just-ended FY23 LCsopening for imports was also dropped significantly by 44 per cent year-on-year worth $4.75 billion which was the lowest in the entire financial year of 2022-23.
According to the data from the central bank, LCs opening to import raw materials of energy sector have been decreased sharply saw 50 per cent decrease in July.
Likewise, import LCs of the raw materials in industrial sector also reduced by 36 percent, for intermediate goods dropped by 30 per cent.
Besides, LC opening to import capital equipment decreased by 22 percent and consumer goods by 21 per cent.
Businessmen claimed that banks are not opening loans as per demand due to the forex crunch.
Importers associated with the ownership of the bank, are able to open LCs. As a result, the overall LCs opening has decreased.
Meanwhile, at the end of July this year country’s gross foreign exchange reserves stood at $29.73 billion which was over $41 billion in June 2022.
More alarmingly, net foreign exchange reserve at the end of the last month, plummeted to $23.37 billion following the International Monetary Fund guideline.
The president of FBCCI, the top organization of traders, Mahbubul Alam said that the banks are discouraging them from opening loans except for essential products.
Due to this, credit opening and imports have decreased. However, the industrial raw material loan should not be opened. The wheels of industry must be kept running.
Banks should be directed to open loans for essential and industrial raw materials.
By contrast, the import of luxury goods should be stopped, he added.
