Monitoring tightened to curb unnecessary imports

The Bangladesh Bank has tightened its monitoring for opening of letters of credit (LCs) to curb unnecessary imports, aiming to reduce the ongoing pressure on foreign exchange reserves.

As part of the move, the central bank on Thursday asked authorised dealer (AD) banks to submit import information to the regulator’s Online Import Monitoring System (OIMS) 24 hours prior to the opening of LCs – based on proforma invoices/purchase contracts.

The reporting requirement for the said transactions will be for import value of $5 million and above or its equivalent, excluding imports by the government. AD banks shall finalise the report on completion of opening of the relative LCs, reads a Bangladesh Bank notice on Thursday.

Generally, the banks are required to report all types of foreign exchange transactions carried out by them, including those of offshore banking operations, to the different web portals of Bangladesh Bank on a regular basis.

Speaking to The Business Post, a senior official of the central bank said the regulator has tightened the monitoring process on opening of LCs as Bangladesh’s foreign exchange reserves continue to dip due to the growing import payments.

During the last fiscal year’s July-May period, import payments stood at $75.13 billion, up from $50.90 billion posted in the same period of FY21, shows the Bangladesh Bank data.

To help banks settle import bills, the Bangladesh Bank sold a record $7.62 billion to banks in FY22 and $441 million in the current fiscal year – which began on July 1.

The regulator sold $135 million to banks on Thursday, BB officials said.  Taka is continuously depreciating against the American greenback due to the volatility in foreign exchange market. 

The local currency has depreciated by 9.24 per cent this year alone. The inter-bank exchange rate stood at Tk 93.95 per USD on Wednesday, up from Tuesday’s Tk 93.45.

The continuous injection of USD in the banking sector has put pressure on the foreign exchange reserves of Bangladesh.

The forex reserves stood at $39.79 billion on Wednesday, a dip below the $40 billion mark recorded for the first time since September 2020, as the country cleared $1.99 billion as payment to the Asian Clearing Union (ACU).

It continued to dip slightly to $39.70 billion on Thursday.

Before Thursday’s move, the Bangladesh Bank on July 4 tightened its regulation, requiring importers to maintain up to 100 per cent margin against the import of luxurious and nonessential items, including sedan cars, sport utility vehicles and multi-purpose vehicles.