Banks witness 24pc decline in 4 months

The prolonged dollar crisis has intensified in recent times. In the first four months of the current financial year, both LC opening and settlement for the import of goods decreased.

The government has imposed restrictions on imports from the beginning of the last financial year to deal with the reserve crisis. LC opening of various products is regulated. While this did not have an immediate impact on imports, growth turned negative from October last year. Since then, the growth in LC opening has been steadily declining.

According to the statistics of the Bangladesh Bank (BB), in the first 4 months (July-October) of the current financial year, the LC settlement of the banks has decreased by more than 24 percent. Banks settled LCs worth $2,894 crore in the first 4 months of FY 2022-23. From there, it decreased to $2,197 crore in the first 4 months of the current financial year. Apart from this, there has been negative growth in imports for 12 consecutive months till September this year.

Along with this, the amount of LC opening on the import of goods decreased by 11.22 percent during this period. During these four months, LCs have been opened for the import of goods worth a total of $2,182 crore. Whereas during the same period of the last financial year, LCs were opened for $2,466 crore.

Imports of capital goods, including industrial capital equipment, have decreased significantly as a result of LC opening and clearance. As a result, the price of products in the country is increasing. Apart from this, the import and trade through various ports of the country have also decreased due to the inability to open LCs.

It is known that the negative trend of import growth was the highest towards the end of the last financial year. The dollar crisis was also acute at that time. The central bank also rejected several LC applications. Even after one and a half years passed, BB could not bring the dollar crisis under control. Attempts were made but failed. This has deepened the crisis, due to which the current fiscal year’s import growth is in a negative trend.

Meanwhile, the country’s foreign exchange reserves have now dropped below $20 billion after clearing import liabilities through the Asian Clearing Union (ACU). Unable to open LCs as per demand, many entrepreneurs have reduced essential imports like industrial raw materials, consumer goods, and capital equipment.

Mohammad Hatem, Executive President of Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), told The Daily Messenger, “Both capital equipment and raw material imports have decreased. Due to the gas crisis, the production capacity cannot be used. All in all, the economy is headed for a major crisis.”

The ongoing dollar crunch and LC paradox are now seen by entrepreneurs as the biggest challenges for companies in the industrial sector. Consumer goods importers said that banks are giving various conditions to open LCs. According to them, production is decreasing; on the other hand, the sale of consumer goods is also decreasing due to inflation.

Meghna Group of Industries chairman Mustafa Kamal told The Daily Messenger, “Banks have reduced LC opening. Imports of industrial raw materials have decreased due to a lack of availability of dollars as per demand or the inability to open LCs. Naturally, it has a negative impact on the production system.”