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Bangladesh Bank has curtailed import trade operations due to a decline in reserves, consequently impacting the opening of import letters of credit (LC). By the end of October this year, the opening of LCs for consumer goods imports in the country experienced a significant decrease of over 21.65 percent compared to the previous year.
In the previous year, specifically from July to December, import letters of credit (LCs) were opened for daily necessities valued at $4.05 billion. However, this figure has significantly decreased to $88 million. Additionally, LC settlements have experienced a decline of 22.52 percent during this period. These details were sourced from an updated report released by Bangladesh Bank.
According to the report, the total value of import letters of credit (LCs) opened until December of the current fiscal year amounted to $32.92 billion. This figure reflects a decrease of $1.86 billion compared to the previous year, when LCs opened reached $34.78 billion by December.
Among consumer goods, the opening of import credits for rice and wheat experienced a decline of 17 percent. Last year, until December, import LCs totaling $62.60 crore were opened for these commodities, which decreased to $45.90 crore this year. Notably, the most substantial decrease in LC openings for consumer goods imports was observed in the oil category. In the previous year, LCs worth $126.40 crore were opened for oil imports, whereas this year, the figure plummeted to $70.64 crore.
On the other hand, imports of milk and cream amounted to $1.35 billion, compared to $1.12 billion in the previous year, reflecting a notable increase.
During the same period, the import of spices saw an increase of approximately $3 million. However, the most significant increase was observed in sugar imports. Until December last year, sugar imports amounted to $13.86 million, but this fiscal year, it surged to over $380 million.
Despite these specific increases, overall consumer goods imports experienced a notable decrease of $1.86 billion.
Recently, there has been a massive foreign exchange crisis due to the reduction in reserves. As a result of this, Bangladesh Bank imposed restrictions on import trade. A maximum margin of 100 percent is levied on imports of luxury goods. The central bank imposes a margin of 75 percent on the import of foreign fruits. Besides, if the LC on any import is more than 5 million dollars, there is a provision to take prior permission. A few days later it dropped from $5 to $3 million. Bangladesh Bank's permission is still required to open an LC above 3 million dollars.
Fuel imports decreased by 5.56 percent. A total of 28 crore dollars decreased in the span of one year. Besides, the import of industrial raw materials has also decreased by 10.19 percent. Imports in this sector decreased by 56 crore dollars. Settlements have declined further. Settlements decreased by 31.21 percent from $15.32 billion to $10.54 billion in the previous year.
In addition to the decline in the opening of import letters of credit (LCs), the payment of LCs has also decreased until December. According to the latest data analysis, LCs disbursed amounted to $28.94 billion until December last year. However, this year, the figure has decreased to $21.97 billion.
An official from Bangladesh Bank explained that banks have cleared deferred LC bills in the first six months of the year, leading to a decrease in LC repayments. Moreover, import restrictions imposed since last year have resulted in reduced imports. Consequently, the payment of import duties has also decreased compared to previous periods.
The country's dollar reserves continue to decline despite various measures implemented by Bangladesh Bank. While import costs have decreased due to the bank's strict regulations, the reserves fail to increase as a result of regular dollar sales from the reserve.
Furthermore, export earnings did not meet the government's expectations in September. However, there has been an increase in remittances, with January seeing a notable surge. Remittances have been steadily rising since the end of 2023, reaching $2.10 billion in January, which is $11 crore more than the previous month's figure of over $1.99 billion in December.
In January 2024, export earnings surged to a historic high of $5.72 billion, representing a substantial increase compared to the previous record set in December 2023, when export earnings totaled $5.36 billion, according to the Export Promotion Bureau (EPB) report on monthly export data.
Messenger/Fameema
