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Bank & Finance - September 16, 2023

Banks unable to pay import bills

Short of dollar

Mahfuz Emran: Due to the dollar crisis, the banks are not able to pay the import bills on time. This crisis has become evident especially in government banks. LC is opened for import of goods for government essential purchases. But the payment date has to be changed again and again due to inability to fund the necessary dollars.
As the reputation of the bank is getting damaged in the international arena, the banks have to pay additional charges for not being able to pay the LC liability on time. As a result, the import cost of goods is also increasing, which has a direct impact on inflation.
A government bank official who is in charge of fund management told Daily Industry that LC was opened for import of essential products of the government such as diesel, fertilizer, consumables and parts of various government projects on the instructions of the government and with the assurance of Bangladesh Bank’s cooperation.
Products are also imported. But there is a problem when it comes to paying the debt. The bank does not have the required dollars. Even if the central bank is supposed to cooperate, it is not done on time. Eighty percent of the cost of opening a commodity LC is co-financed. Not all at once. It is done little by little. Banks are asked to provide the remaining 20 percent. For example, yesterday the demand of a bank was about $55 million.
But $2.85 crore has been supported from Bangladesh Bank. Thus, the demand for dollars per day is very low. Banks are also not able to provide the necessary dollars. Because remittance collection is said to be at the rate of Tk 109.50 per dollar. And it has been asked to sell at a maximum rate of Tk 110. But the reality is that no one is trading at this rate.
Another government bank fund manager said his bank is buying remittance dollars at BAFEDA fixed rates. But other banks are extracting remittances at higher rates through various strategies. As a result, being a government bank, it is lagging behind in collecting remittances while (See Page-2)
(From Page-1)
complying with the fixed rate. Also, unable to collect dollars from other banks.
For example, an Islamic bank was lent to meet the money crisis. That bank has dollars. Referring to the plight of his bank, the concerned Islamic bank was asked for dollars. But they have clarified that they are spending Tk 113 for every dollar to collect remittances. So, if you want to get a dollar, you have to pay Tk 113.30. But they can’t sell dollars at more than Tk 110. If a dollar is bought at the rate of Tk 113.30 and sold at Tk 110, who will be responsible for the loss of Tk 3.30 per dollar.
He said, while following the instructions, remittances are lagging behind in collection, on the other hand, they are not getting the necessary dollar support from the central bank, all together, the banks are not able to pay the LC liabilities on time. Banks are forced to pay additional fines to foreign banks. On the other hand, in the long term, the reputation of local banks is getting damaged. It has to be guaranteed by another foreign bank to open a new LC for import of goods. As a result, the import costs of banks are increasing.
Meanwhile, related sources of Bangladesh Bank said that before opening LC for importing goods, the banks have to make provision of dollars. That is, when the liability of importing goods has to be paid, there must be an advance plan from which source these dollars will come. But the banks are opening LCs one after the other without thinking ahead. When the time comes to repay the debt, it is falling into disrepair. Approaching Bangladesh Bank.
Bangladesh Bank is not able to supply dollars from reserves as before. Over $14 billion was sold from reserves to distressed banks last fiscal year. Dollars are being sold this year as well, but priority is being given to paying the government’s import obligations. Yesterday, net foreign exchange reserves fell to $21.70 billion.
However, as a condition of getting a loan from the IMF, at least net reserves of 24.46 billion dollars must be preserved. In this situation, it will not be possible to supply more dollars from the reserves at once. Banks have to raise dollars from their own sources.

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