Industry Desk: Goods worth $83.68 billion were imported into Bangladesh through letters of credit, or LCs, in the last fiscal year, which is a massive 46 percent jump from the previous fiscal year, according to updated import data released by Bangladesh Bank on Sunday,
Importers in Bangladesh had opened LCs worth $92.23 billion to import goods in the fiscal year 2021-22, which is 37.59 percent more than the previous fiscal year.
In the financial year 2020-21, $67 billion worth of LCs were opened, while products worth $57.25 billion were imported.
LC settlement rate has increased by 7.52 percent in the last fiscal year compared to the previous year.
It takes up to 45 days for the goods to arrive in the country after opening the LC for import. After the arrival of the goods, the importer makes the payment in foreign currency through the concerned bank, which is called LC settlement.
Some importers also directly bring in products without an LC. Bangladesh Bank has yet to release the data. As a result, the complete picture of how much goods were imported in the last fiscal year is yet to be made public.
Almost 90 percent of Bangladesh’s imports and export, i.e. foreign trade transactions are completed in US dollars. Imports started to increase last year when the wheels of the economy started moving in full force after the pandemic.
Since September-October last year, the LC opening rate on imports has been increasing, resulting in an increased demand for greenbacks as well. The outbreak of the Ukraine-Russia war has skyrocketed costs in the global commodity supply system. As the cost of imports increased, the rate of the US dollar began to fluctuate across the world.
Though recently released data suggested that Bangladesh made a record in exporting goods and services in the last fiscal year, a low remittance inflow had affected the balance of payments, resulting in a shortfall of US dollar reserves.
To rein in the spending on the US dollar, Bangladesh Bank started tightening the import of luxury goods since April. However, both settlement and opening rates of LCs kept increasing at a record rate.
At the end of the fiscal year, the LC opening rate stood at 37.59 percent, and the settlement rate stood at 45.15 percent, which resulted in the country’s foreign trade and current account deficits reaching a record high.
Meanwhile, to meet these demands for foreign currencies for settling LCs, the central bank had no choice but to constantly sell US dollars and reduce the value of the local currency, the Taka.
On Jul 21 this year, the US dollar rate stood at Tk 94.45, compared to Tk 84.80 on Aug 1 last year. In Aug last year, the foreign exchange reserve stood at $48.02 billion, the highest in the country’s history. On July 20 this year, it fell to $39.67 billion.
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