LC opening increases for rising of imports

Golam Mostafa Jibon: The number of LC (letter of credit) opening has increased due to the increase in imports of all types of industrial raw materials, interim products and capital machineries.
In the meantime, as Europe-America has started to overcome the corona situation, Bangladeshi businessmen and industrialists have engaged into manufacturing activities in a new enthusiasm. The amount of credit for importing goods or opening of LCs is increasing which makes record every month. Last October, Bangladeshi businessmen-entrepreneurs opened LCs worth about $ 7.5 billion.
According to the current exchange rate at Tk 85.80 per dollar, the amount is Tk 63,677 crore. Bangladesh in its history before never saw the scenario of spending such as a huge amount of foreign currency in purpose of opening LC for importing goods in a single month.
All in all, in the first four months (July-October) of the current 2021-22 fiscal year, the businessmen-entrepreneurs have opened LCs worth $ 27.32 billion. In terms of money, the amount is Tk 2, 34,425 crore.
During the same period of the last fiscal year 2020-21, LCs worth $17.94 billion was opened. As it is seen, the number of LC openings in the country has increased by 52.26 percent in these four months.
Data analysis shows that in these four months, LCs worth an average $6.83 billion has been opened in the country in each month. The rush to opening LC has been hampered by Bangladesh Bank’s foreign exchange reserves, which have come down to below $ 45 billion.
Economists and business leaders said, as the corona situation in many parts of the world including Europe and America, began to return to normal, people in those countries began to buy products as before. The situation in Bangladesh also became normal. All in all, the demand for all kinds of products in the domestic and international arena increased tremendously. Due to the demand, Bangladeshi businessmen and industrialists have started works in a new venture. That is why, the import of all kinds of industrial raw materials, interim goods and capital machineries has increased, the amount of LC opening increased.
They also said that, it has cost more money to open LCs due to rising prices of fuel oil, food and all other commodities in the world market. However, the new type of coronavirus-Omicron has pushed the world economy back to normal. Panic has spread in Bangladesh as well.
The price of fuel oil has come down considerably in the global market. In this situation, the traders said that, they will open LC for importing goods in the coming days keeping in view the world situation.
In the midst of the coronavirus epidemic, in the last fiscal year 2020-21, traders and entrepreneurs opened LCs worth $6,704 crore for importing goods. That number was 19.50 percent more than the previous financial year.
The latest data released by Bangladesh Bank on the opening of LCs shows that in the current fiscal year 2021-22, most foreign exchange was spent on importing raw materials for the opening of LCs during July-October; That is $9.70 billion, up 49.46 percent from the same period last year.
LCs worth $183.20 crore has been opened for the import of capital equipment, an increase of 21.21 per cent. LCs have been opened for inter-industry products worth $238.20 crore; the growth has been 70.28 percent. LCs for importing other industrial equipment worth $767.33 crore has been opened; which has increased by 50.10 percent. In addition, LCs worth $235 crore has been opened for the import of fuel oil. It has increased almost double or 90.40 percent. LCs for food products (rice and wheat) imports have been opened for $288.70 crore, which has increased by 60.47 percent.
While analyzing the data on the opening of a four-month import LC, Ahsan H. Mansoor, executive director of the Policy Research Institute (PRI), an economics researcher, said, “The economy of Bangladesh turned around after corona hit. Imports and exports were increasing. Revenue collection gained momentum. Without remittances, almost all indicators of the economy turned positive. The impact of rising commodity imports began to fall on investment. The economy began to recover. But now the situation looks pretty bad. There seems to be another big push coming in the world economy due to appearance of Omicron. It remains to be seen how serious Omicron’s push will be.”
Ahsan Mansoor advised the businessmen of the country to conduct economic activities including import-export by keeping a close watch on the world situation.
Faruk Hasan, president of BGMEA said, “We are very concerned, Every moment is cutting off in anxiety. We were just starting to turn around. But now, we are in panic.”
Exports were growing quite well; Lots of orders were coming. But who knows where Omicron’s push will take us! In the fiscal year 2019-20, a total of $56.10 billion LC was opened for import of various products, which was 10.21 percent less than the previous fiscal year 2018-19.