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Bank & Finance - Corporate - Management - October 30, 2023

LC settlement reduced further

Staff Correspondent: Many traders are unable to open letters of credit (LC) on demand due to the dollar crisis. They are also facing various problems while settling the LC. Due to this, imports are decreasing. In the first quarter of the current financial year, LC has settled products worth $1,650 million. Which is 25.40 percent less than the same period of last financial year. LC openings fell by over 18 percent during the same period.
During the dollar crisis, the government and the central bank have taken various regulatory measures to open LCs. There are various measures in place including margin up to 100% in opening of LC, increase in duty, monitoring of product holding. Despite taking various initiatives to overcome the dollar crisis, not much is being done. Foreign exchange reserves fell sharply last Thursday to $20.90 billion. Remittances through legal channels fell on expectations of a further increase despite the gradual appreciation of the dollar. Remittances decreased by 13.34 percent in the first three months of the current financial year. Again, significant part of the export income is not coming to the country on time. Last fiscal year, $55 billion were exported, but $46 billion came into the country.
Those concerned said that the small and medium sector businesses are suffering more as a result of the import control measures. On the one hand, their production is decreasing, on the other hand, there is a negative impact on employment. Economists are calling for tougher measures to curb money laundering and to market-base the dollar, leave interest rates to the market, and reduce defaults to ease the dollar crisis. According to the data of Bangladesh Bank, during the period of July-September of the current financial year, a total of $1,589 million LC was opened. At the same time, $1,650 million were settled. Imports of capital machinery and industrial raw materials are the biggest indicators of whether production and employment are increasing. Imports of both these products are declining more.
According to available data, LC settlement of capital equipment fell by nearly 40 percent in the first quarter. LC disposal of raw materials used in industry has decreased by 36.60 percent. Sequentially – LC settlement of petroleum decreased by 19.53 percent, intermediate goods by 16.31 percent and consumer goods by 15.91 percent. Other sectors decreased by 16.22 percent.

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