LC settlements increase slightly to $5.42b in Oct

Staff Reporter :
The opening of letters of credit for imports soared to $5.42 billion in October driven by rising remittance inflows and seasonal fertilizer demand.

Import letter of credit (LC) openings and settlements in the previous month was up by 14 percent from September this year but down $700 million from August, according to the data from the Bangladesh Bank (BB).
Earlier, the monthly LC opening had dropped sharply to $4 billion level at the end of financial year 2022-23 from about $9 billion in the first month of FY23, but it started rising again from the beginning of the current financial year 2023-24.

LC opening was $5.23 billion in September and $6.1 billion in August and $4.37 billion in July in FY24.

Senior bank officials said opening of LC in October was in line with normal levels of around $6 billion per month, after declining significantly in September due to low remittances and uncertainty about the dollar rate in banks.

Indentifying the reasons of increase they said, it was mainly raised to increase due to the imports by the government. LC opening for importing seasonal fertilizer ahead of the boro paddy cultivation season and capital machinery for power sector projects was also increased in the reporting month.

However, banks remain wary due to the dollar crisis and future payment pressure and are offering 6-9 month deferred LCs, while traders prefer draft LCs (payable within 7-10 days of LC opening), Bankers expressed.

Moreover, the overall imports saw a sharp decline due to increased oversight by the central bank, aimed at preventing misuse of the facility and curbing money laundering amid the ongoing forex crunch.

In the past 27 months, the central bank sold over $25 billion from its reserves.

The move has led to a reduction in the trade deficit, with the country’s import payments falling by 15.76 per cent to $69.49 billion in FY23, down from $75.4 billion in the corresponding period of the previous year, the Bangladesh Bank data showed.

Besides, imports declined to $14.74 billion in July-September 2023 compared with that of $19.34 billion in July-September 2022.