BB now ups LC margin to 100% for luxury products

The Bangladesh Bank (BB) has further tightened luxury item import restrictions, resetting the letter of credit (LC) margins at 100 per cent and 75 per cent for bringing in luxury and non-essential products respectively.

The move is aimed at offsetting the rising import costs and staving off pressure on forex reserves.

Earlier in May, the LC margin was set at 75 per cent for importing luxury items and 50 per cent for non-essential products.

A central bank circular on Monday night said the new margins would apply to expensive cars, cosmetics, gold ornaments, ready-made garments, household electrical appliances, beverages, furniture, jute and leather products, fruits and flowers, alcohol, tobacco leaves, and a number of other products.

It also said luxury goods importers would have to deposit the full import prices in the bank from now on.

Besides, the central bank set a 75 per cent LC margin for importing all products, except for baby and essential food, lifesaving drugs and medical accessories, capital machinery, raw materials of productive and export industries, agricultural items, and essential products for the government’s priority projects.

The circular said importers would have to pay the margin money from their own sources and banks would not be allowed to provide loans for this.

On May 24, the National Board of Revenue slapped up to a 20 per cent regulatory duty on furniture, fruits, and flower products as part of the government’s broader objectives to discourage imports and contain the foreign exchange market volatility.

Moreover, the government restricted foreign trips and training for both government and private sector officials. It also decided to delay the implementation of import-dependent projects.

The initiatives were taken to discourage imports and stabilise forex reserves.

In the July-May period of FY22, import payments increased by 39 per cent to $75.4 billion compared to the same period of the previous financial year. Also, remittance earnings declined by around 16 per cent to $19.19 billion and current account deficits rose to $17.23 billion in this period. The foreign exchange reserves stood at $41.8 billion on June 30 this year.