Opening letters of credit (LCs) for imports in Bangladesh dropped by around $14 billion

Opening letters of credit (LCs) for imports in Bangladesh dropped by around $14 billion, or 23.45 per cent, year on year (YoY) in the first eight months of fiscal 2022-23 (FY23) to $45.52 billion due to restrictions by the central bank and a fall in export orders.

The raising of LC margin to 100 per cent—among a few other restrictions to minimise the dollar crisis—discouraged businesses from importing capital machinery and luxury goods.

The Bangladesh Bank also directed banks to report imports worth more than $3 million before opening LCs. It adopted the policy of verifying reported international prices of such products before approval.

Bangladesh Bank data shows that in terms of monetary value, the highest LCs were opened for industrial raw material imports, a major part of which was used by garment exporters.

Between July last year and February this year, $15.56 billion worth of LCs were opened in this segment, which is $6.68 billion, or 30.05 per cent, less than the same period of the previous fiscal.

Businesses say they have reduced opening LCs for importing raw materials.