In February, Bangladesh experienced a slight decline in the opening of letters of credit (LC) for imports, as per Bangladesh Bank data.

The LC opening decreased to $5.22 billion, down from $6.33 billion in January 2024 and $5.39 billion in December 2023. Despite this, January witnessed the highest LC opening since September 2022, which stood at $6.33 billion.

LC opening decreased to $5.22 billion, down from $6.33 billion in January 2024 and $5.39 billion in December 2023.
January witnessed highest LC opening since September 2022, which stood at $6.33 billion.
From July to February in FY 2023-24, LC opening totalled $44.47 billion, almost matching figure of $46.43 billion recorded in the same period of FY23.

From July to February in FY 2023-24, LC opening totalled $44.47 billion, almost matching the figure of $46.43 billion recorded in the same period of FY23.

The preceding financial year witnessed a significant drop in monthly LC opening, from around $9 billion in the first month to approximately $4 billion by the end of FY 2022-23.

However, LC opening began to rise again at the start of the current fiscal year, reaching $5.42 billion in October, $5.23 billion in September, and $6.1 billion in August from $4.37 billion in July.

The sustained increase in LC opening raised concerns amid a severe dollar crisis and dwindling foreign exchange reserves, according to bankers.

Government-driven imports, particularly of capital machinery, contributed to the rise. Additionally, imports surged during Ramadan, the Muslim fasting month.

Over the past 32 months, the central bank has sold more than $30 billion from reserves, leading to a decline below $20 billion by March 20, according to IMF guidelines.

To address the import growth and protect foreign exchange reserves, the government and Bangladesh Bank implemented initiatives since April 2022.

High LC margins were imposed on non-essential and luxury imports, resulting in decreased imports and a reduced trade deficit, which fell to $69.49 billion in FY23 from $75.4 billion the previous year, as per the central bank data. These measures aimed to prevent misuse of facilities and curb money laundering amidst the ongoing crisis.

Fibre2Fashion News Desk (DR)