Overall LC opening drops 25.45pc in Q1
Staff Reporter :
Amidst the ongoing turmoil in the global financial landscape, the issuance of letters of credit (LCs) for the importation of diverse goods in the country has witnessed a significant decline.
According to the latest data of the Bangladesh Bank, LCs for various products have been opened worth $15.89 billion crore, which is $3.45 billion or 25.40 per cent less than the same period in the last fiscal year.
The LC openings for various products amounted to $19.38 billion in the corresponding period of last fiscal year (2022-23), the data showed.
Along with the LC opening, the repayment of old LC liabilities has also decreased due to the ongoing dollar crisis, while the previous LC settlements declined by about 25.40 per cent during the mentioned period.
As per the BB data, LCs for importing consumer goods amounted to $1.42 billion in the first three months, which was $2.72 billion in the same period of the last fiscal year.
Consequently, the opening of LCs for consumer goods like cereals, edible oils decreased by 47.80 per cent in the span of one year and the settlement of consumer goods LCs fell by 15.91 per cent, the data showed.
The import of capital machinery also plunged, by nearly 24 per cent to $547 million, with its implications on the production chain as well as a domino effect on the market.
And the import of intermediate goods — again a necessity for industrial production — dropped nearly 28 per cent to $ 1.1 billion during the period under review.
Another squeeze on economic activity comes from fuel front — petroleum imports registered a fall by 12.4 per cent to $2.4 billion over the corresponding period and industrial raw-material imports declined by 22.6 per cent to approximately $5.2 billion during this past July-September period.
Economists and manufacturers find two main reasons behind the sharp fall in imports. Dollar shortage is one as the banks are unwilling to open LCs. They also identified higher inflation which helps trim imports of some luxury goods and upcoming general election.
Dr Ahsan H Mansur, Executive Director of the Policy Research Institute of Bangladesh (PRI), blames dollar shortage for the downturn in capital-machinery imports.
“There is also uncertainty in both export and domestic markets. Generally, sales are down,” he added.
The implication of this is that the productive capacity of the economy will not increase, and it may hit the GDP.
Syed Mahbubur Rahman, Managing Director of Mutual Trust Bank, said, “We are still selectively opening LCs. How many dollars will come in is our consideration for issuance of LCs.
We are trying to increase the flow of dollars in different ways. Hopefully, the situation will return to normal in the near future.”
