Opening of letters of credit (LCs) decreased by 7.35 per cent to $5.68 billion in April, from $6.13 billion in March, during the Eid-ul-Fitr vacation.
However, LC settlements increased to $5.54 billion in April, from $5.35 billion in March, a senior official of Bangladesh Bank (BB) confirmed to The Business Post on Thursday.
The managing directors of several private banks also said that the country’s banks were closed for five days due to Eid-ul-Fitr vacations while readymade and other production-related houses were closed for 15 days. At that time, the demand for raw materials and other production had decreased, and importers did not open LCs.
In the past one and half years, BB has implemented several measures to reduce imports, including maintaining import LC margins at 100 per cent and discouraging the import of luxury products as well.
As a result of these initiatives, BB has improved the current account balance of the country’s Balance of Payment. On the other hand, however, the financial account is worsening due to the increasing pressure on the foreign exchange reserves.
Zahid Hussain, former lead economist of the World Bank Dhaka Office, told The Business Post, “BB imposed a bar on import LCs for 100 per cent margins and it’s not good for the economy. Reducing imports is not a solution for our country. If BB tries to control the import, then product prices will rise.”
He also said that the central bank is trying to control the forex market by imposing restrictions on imports and it was also not a good method.
