LC opening, settlement drop by 4.23pc, 14pc respectively in July-Feb

Letters of Credit (LC) opening and settlement in the first eight months in the ongoing financial year (FY24) dropped by 4.23 per cent and 14 per cent respectively, according to Bangladesh Banks (BB) latest statistics.

As per the official statistics, total LC opening amount during July-February in the running fiscal was $44.5 billion which during the same time in the last fiscal was $46.5 billion.

On the other hand LC settlements during July-February in the current fiscal 2023-24 were $44.32 billion which in the same period in last fiscal was $51.5 billion. It drops by 12.38 per cent.
Among the major items the LCs aims to import were consumer goods, capital machinery, intermediate goods, petroleum, industrial raw materials and others.

The highest amount of LCs were opened for industrial raw materials for about $15.86 billion and the second highest was for petroleum at $6.6 billion and the third were consumers goods for about $5.5 billion. Others goods total about $12.7 billion.

A senior BB official said due to the governments strict action for saving foreign currencies reserves the LCs opening declined but in the coming days hopefully it may rise again. He said as imports are dropping the countrys trade deficits are also narrowing and the current account surplus is on rise.

Recently BB told commercial banks to avoid unnecessary opening of letters of credit that it may help to stop rapid deplete of reserves in foreign currency mainly in green back. The steps are working he said and added that imports have significantly dropped and the reserve is in stable position now.

When contacted a local tiles manufacture said, "I am not in a position to open letters of credits due to dollar crisis." He said his factory is running at lower capacity due to scarcity of raw materials, adding  "This is squeezing my business."

He said private sector credit is also declining due to problems in opening LCs and if it persists long there will be negative consequences in the economy and business.