During the July-September period of the 2023-24 financial year, the opening of letters of credit (LC) experienced a significant 18 per cent decline.
This reduction is attributed to a shortage of dollars and increased monitoring by the Bangladesh Bank aimed at ensuring responsible LC openings, according to a report by the Bangladesh Bank.
According to data from the central bank, LC openings in July-September of FY ’24 dropped to US $ 15.89 billion, a substantial decrease from the US $ 19.38 billion recorded during the same period in FY ’22.
Bankers explained that the decline in imports was a consequence of the heightened scrutiny by the central bank, which sought to prevent the misuse of this facility and combat money laundering during the ongoing crisis.
Additionally, the persistent shortage of dollars compelled many businesses to reduce their import activities.
Experts have expressed concern that the continued decline in imports may have an adverse impact on economic growth, as prolonged reductions in business production could exacerbate inflationary pressures. Furthermore, several banks facing the dollar crisis were unable to meet their LC payment obligations, further contributing to the decrease in new LC openings.
LC openings for various import categories, including capital machinery, intermediate goods, consumer goods, and industrial raw materials, all exhibited significant declines in July-September of FY ’24.
