LC opening, settlement slightly rise in May

The opening and settlement of letters of credit (LCs) in Bangladesh rose slightly in May compared to the previous month.

According to data released by the central bank, LC opening stood at $5.33 billion in May, up from $4.30 billion a month ago.

Besides, LC settlement stood at $5.18 billion during the period, up from $4.69 billion in April.

Industry insiders said the LC opening and settlement both rose due to the growing demand despite austerity measures taken by the authorities.

However, bankers pointed out that both the LC opening and settlement amount were not picking up compared to the previous year.

LC opening and settlement rate continued to fall from the beginning of the ongoing fiscal year.

Pubali Bank Managing Director and Chief Executive Officer Mohammad Ali recently said luxury items are still being imported despite various measures to control that.

He said the government should take strict measures to stop this.

In July of this fiscal year, LC opening was at $6.32 billion while LC settlement was at $7.70 billion. However, both opening and settlement continued to fall and stood at $4.30 billion and $4.69 billion in April respectively due to the central bank measures to control import payment.

In July last year, the Bangladesh Bank imposed a 100 per cent LC margin on the imports of luxury and non-essential items.

In the same month, the banking regulator also asked banks to inform it 24 hours before opening LCs amounting to $3 million or above as part of the austerity measures.

In the meantime, despite a downward trend of import payment, the central bank has continued to pump USD to the market.

During the ten months of this fiscal year, the regulator sold around $13 billion to the market from its forex reserve. It sold over $7 billion to banks in the last fiscal year.

Currently, banks, especially the state-run ones, are taking US dollar support from the central bank for settling import payments of Bangladesh Petroleum Corporation, Bangladesh Agricultural Development Corporation and Bangladesh Chemical Industries Corporation, among other government agencies.

The country’s forex reserve has continued to fall since August of 2021 because of the central bank’s USD selling spree, according to industry insiders.

The foreign exchange reserves stood at $29.91 billion on May 31. The reserves were at $42.20 billion at the same time last year.