Amid the ongoing scarcity of US dollars in Bangladesh, the Bangladesh Bank has once more reduced the retention limit for exporters, which dictates the amount they must keep in their foreign currency accounts sourced from their export proceeds.

Exporters are permitted to retain a portion of their earnings in what is known as the export retention quota (ERQ) accounts. This allowance enables them to settle back-to-back letters of credit liabilities without incurring exchange losses.

For instance, merchandise exporters are entitled to retain 60 per cent of the repatriated FOB (free on board) value of their exports. However, for goods with a high import content, such as naphtha, furnace oil, bitumen, garments produced from imported fabrics, and electronic goods, the retention quota is set at 15 per cent, in accordance with the central bank’s 2018 guidelines.

In July of the previous year, the Bangladesh Bank instructed banks to immediately convert 50 per cent of the balance held in the ERQ accounts into local currency. Furthermore, they were ordered to reduce the retention limits from 15 per cent, 60 per cent, and 70 per cent to 7.50 per cent, 30 per cent, and 35 per cent, respectively.

The reduced limits were effective until 31st December, after which they reverted to the previous levels on 1st January, as no further instructions were issued by the central bank at that time.

Recently, the Bangladesh Bank once again revised the limits to 7.5 per cent, 30 per cent, and 35 per cent. However, this time, the central bank did not specify the duration for which this latest directive would be in effect.