LC settlements decrease 9% in July

The LC (letter of credit) settlements – also known as actual import payment – fell by 9 per cent to $6.58 billion in July this year, compared to 7.75 billion recorded during June 2022, shows Bangladesh Bank data.

Addressing a media brief on Sunday, the central bank’s Executive Director and spokesperson Md Serajul Islam said, “The LC settlements have fallen in July due to a series of Bangladesh Bank initiatives aimed at reducing import payments.

“This figure will come down further in the coming months.”

The central bank data further shows that the opening of LCs fell by 30.20 per cent to $5.47 billion in July, from $7.9 billion posted in June. Islam added that the opening and settlements of LCs fell as the regulator monitored such processes in banks.

At the beginning of July, the Bangladesh Bank imposed a 100 per cent cash margin for opening LCs on several luxury goods, including cars, electronics and gold.

Later on July 28, the regulator asked banks to inform it 24 hours before opening any LC worth $3 million or above – as part of its measure to save forex reserves.

Bangladesh’s foreign exchange reserves dropped to $39.66 billion on August 3, from $46.15 billion recorded in December last year, due to the growing import payments. The settlement of LCs rose by 46.15 per cent to $83.68 billion in FY22, when compared year-on-year.

The central bank injected a record $7.62 billion from its reserves to banks in last FY. Besides, the regulator also pumped over $1 billion into the country’s banking sector this July to cool down the foreign exchange market.

The Bangladesh Bank Governor Abdur Rouf Talukder – in a recent view exchange with journalists – said he is optimistic about the volatile foreign exchange market becoming stable within the next two or three months as import costs dropped in July.

‘Forex market unstable, trying to stablise it’

At Sunday’s media brief, Bangladesh Bank Executive Director and spokesperson Md Serajul Islam said the country’s foreign exchange market is still unstable due to the gap between the inflow and outflow of the USD, and the central bank is trying to stabilise it.

Islam further said, “Currently Bangladesh’s yearly import payments reach around $80 billion against the $50 billion in export earnings and $20 billion remittance earnings. As a result, there is a gap of $10 billion, which puts pressure on the foreign exchange market.

“In this case, we have no alternatives but to reduce the import payments.”

He added, “The central bank has already taken several initiatives to reduce the import payments. We managed to reduce import payments by $2 billion last July.”