Photo : Messenger
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. The first quarter of the fiscal year 2023-24, spanning from July to September, has seen a staggering 48 percent reduction in LC openings for consumer products.
The most significant decline has been in the import of edible oil. Additionally, LC openings and the disposal of industrial capital equipment, raw materials, intermediate products, and fuel oil are also lower than before.
According to Bangladesh Bank data, in the first three months of the current financial year, LCs for various products have been opened worth $1,589 crore, which is $345 crore or 25.40 percent less than the same period in the last financial year, 2022-23. In the first three months of the last financial year, LC openings for various products amounted to $1,938 crore.
The LC openings have decreased as well as the repayment of old LC liabilities due to the recent dollar crisis. During the three months under discussion, the previous LC settlements decreased by about 25.40 percent. LC settlements fell by 18 percent during the same period last year.
During July-September of the 2023-24 financial year, LCs for importing consumer goods amounted to $142 crore. This figure was $272 crore in the same period of the 2022-23 financial year. Consequently, the opening of consumer goods LCs decreased by 47.80 percent in the span of one year, and the settlement of consumer goods LCs decreased by 15.91 percent.
Crude edible oil has seen the most significant drop in LC openings among consumer products during the period under review. The opening of LCs for importing crude edible oil decreased by 87.40 percent, and LC settlements decreased by 72.71 percent in three months. The same is the case with refined edible oils. In the first three months of the current financial year, the opening of LCs for refined edible oil has decreased by 68.96 percent, and settlements for edible oil decreased by 59.46 percent.
Among food products, the LCs for importing rice and wheat decreased by 64.34 percent, the LCs for importing pulses decreased by 41 percent, and the opening of letters of credit for importing medicines and medicinal products decreased by 36.36 percent. Previously, LC openings and settlement rates were on a downward trend throughout FY 2022-23.
Syed Mahbubur Rahman, Managing Director of Mutual Trust Bank, told The Daily Messenger, "We are still selectively opening letters of credit. LCs are being opened based on how many dollars will come in. We are trying to increase the flow of dollars in different ways. Hopefully, the situation will return to normal in the near future."
Meanwhile, the total LCs opened for various products in the last financial year amounted to $6,936.36 crore. This is approximately 26.41 percent less than the previous fiscal year 2021-22 when the LC opening for various products amounted to $9,426.92 crore. LC settlements for various products in FY 2022-23 were $7,219 crore, which is about 13 percent lower than in FY 2021-22. However, in FY 2021-22, the expenditure on importing goods increased by almost 36 percent, with the import amount reaching $8,249 crore.
It is known that many banks still have overdue import liabilities. As money laundering continues outside the country, the flow of dollars is not increasing in line with demand. Exporters are also not repatriating the proceeds from the export of goods on time. Additionally, due to the demand of influential and large businessmen for loans, others are not getting the opportunity. As a result, the crisis persists.
In this regard, Ahsan H Mansur, Executive Director of the Policy Research Institute (PRI), said, "The sources of dollars have been narrowed in various ways. Foreign banks are also not providing support as they did before. Due to the low value of the dollar, not all expatriate income is coming through legitimate channels. Money laundering continues as well. Furthermore, the price of the dollar is not entirely market-driven. The way other countries manage their foreign exchange markets, Bangladesh should also consider adopting."
A visit to a few bank branches in the capital revealed that it is no longer possible to open LCs in person. However, major exporters are still able to open their LCs. Additionally, letters of credit are still being opened for food, fuel, and oil imports. Unfortunately, small and medium-sized entrepreneurs are struggling to open LCs as needed.
Mezbaul Haque, the spokesperson for Bangladesh Bank, said that banks are currently opening around 3,500 LCs daily, and these are approved after verifying their value. However, due to the reduced demand for dollars, overall, LC openings have slightly decreased.
Messenger/Sanjay/Disha
