Payments against import letters of credit (LCs) in August dropped 25% compared to the previous month, owing to steps such as elevating LC margin to 100% to stabilize the country’s forex market.
LC payments stood at $5.93 billion in August, down from $7.42 billion in the previous month, according to the latest report of the Bangladesh Bank.
According to central bank officials, they were discouraging imports of all types of goods except essential items amid depleting foreign currency reserves.
LC payments are gradually decreasing as the central bank is selling dollars for the imports of daily essentials only and imposing the highest LC margins for other products, they added.
Now the amount of LC opening has also decreased and it will decrease further in the future, they said.
Md Serajul Islam, executive director and spokesperson of the Bangladesh Bank, said they were trying to normalize the current economic crisis.
The new governor has taken various steps which are now paying off, he added.
In August, the second month of the current FY23, the opening of LCs by importers stood at $5.31 billion, a 17% decrease from $6.22 billion in the previous month.
The central bank report also shows that LC settlements were $6.85 billion in January this year, $6.55 billion in February, $7.67 billion in March, $6.93 billion in April, $7.25 billion in May and $7.75 billion in June.
Bangladesh has fallen into a record trade deficit due to the massive increase in imports compared to the country’s exports post-Covid and the skyrocketing price of all types of products including energy in the global market.
The trade deficit stood at a record $33.25 billion at the end of the outgoing 2021-22 fiscal year.
At the same time, the current account deficit also surpassed $18.50 billion.
According to the Bangladesh Bank data, banks that are suffering from a shortage of dollars purchased $7.62 billion from the central bank for Tk66,650 crore in fiscal 2021-22.
In continuation of last year, banks have been facing the dollar crisis from the beginning of the current financial year starting in July.
To keep the foreign exchange market stable, the central bank has taken several steps including elevating LC margins to reduce imports of luxury as well as less necessary goods.
At the same time, the central bank continued to sell dollars to banks from its foreign exchange reserves to help the lenders settle urgent government imports.
According to the latest statistics, the central bank has sold $1.8 billion for Tk17,603 crore in the 47 days of the current fiscal year.