Import payments fall 26.66% in March

Letter of credit (LC) settlement, known as import payments, fell by 26.66 per cent year-on-year to $5.62 billion in March due mainly to austerity measures taken by the central bank and the government.

The LC settlements were at $7.67 billion in the same month of last year. LC settlements also fell in the first nine months of the ongoing FY2022-23.

During the July-March period of FY23, import payments stood at $53.14 billion, down from $60.33 billion in the same period of the last fiscal year, as per the latest data from Bangladesh Bank (BB).

This has come after the government and BB introduced several policy changes to ease the pressure on the country’s foreign exchange reserves.

The country’s forex reserve stood at $31.24 billion as of April 5, down from $44 billion on the same day of 2022, as per BB data.

The falling trend of forex reserves prompted the government to take austerity measures amid the forex crisis.

In August last year, the government increased the duty and taxes on 300 non-essential and luxury items such as SUVs, mobile phones and home appliances.

Before that move, BB in July asked banks to submit reports on all types of foreign exchange transactions, including those of offshore banking operations.

In the same month, the banking regulator had asked banks to inform it 24 hours before opening an import LC worth $3 million or above.

On May 10 this year, BB toughened its rules for luxury item imports. A day later, the government decided to stop foreign trips of its officials and postponed the implementation of less important projects that require imports.

According to industry insiders, now is the right time to withdraw those austerity measures because most businesses are not able to open LCs due to strict rules and regulations.

Bangladesh’s exports fell 2.49 per cent year-on-year in March, which was the first decline in five months and those austerity measures on imports are one of the reasons behind the falling trend.

However, overall export earnings were in a positive trend between July and March of FY23 with receipts growing 8.07 per cent year-on-year to $41.72 billion.