Following an increase in January, there was a modest fall in the opening of letters of credit (LC) for imports in February.
According to Bangladesh Bank data, LC opening declined to US $ 5.22 billion in February 2024 from US $ 6.33 billion in January 2024 and US $ 5.39 billion in December 2023. After September 2022, when it was US $ 6.33 billion, January’s LC opening was the highest.
From July to February in FY 2023-24, LC opening totalled US $ 44.47 billion, nearly matching the US $ 46.43 billion figure recorded in the same period in FY ’23.
The monthly LC opening for the preceding fiscal year fell precipitously, from around US $ 9 billion in the first month of FY ’23 to US $ 4 billion by the end of FY 2022–2023.
At the start of the current fiscal year, LC opening increased again, rising from US $ 4.37 billion in July to US $ 5.42 billion in October, US $ 5.23 billion in September, and US $ 6.1 billion in August.
The persistent increase in LC opening raised concerns because the nation is struggling with a serious dollar issue and running out on foreign exchange reserves, according to bankers.
Over the past 32 months, the central bank sold more than US $ 30 billion from its reserves.
This included US $ 9.5 billion allocated to banks in July-October of the current financial year 2023-24, US $ 13.5 billion in FY ’23 and US $ 7.62 billion in FY ’22.
Thus, as per criteria from the International Monetary Fund, overall foreign exchange reserves fell below US $ 20 billion on 20th March.
According to bankers, the Taka depreciated against the US dollar and hit Tk110 as a result of the ongoing depletion.
Since April 2022, the government and Bangladesh Bank have taken several steps to combat the rapidly increasing imports and protect the nation’s foreign exchange reserves.
High LC margins were enforced by the central bank on imports, especially on luxury and non-essential goods.
Aiming to avoid exploitation of the facility and reduce money laundering amid the ongoing crisis, the central bank intensified control, which resulted in a substantial fall in overall imports, according to bankers.
The move has led to a reduction in the trade deficit, with the country’s import payments falling to US $ 69.49 billion in FY ’23, down from US $ 75.4 billion in the corresponding period of the previous year, the central bank data showed.
