Banks give priority on opening LCs
29 January 2023
Al Amin :
Private companies are still failing to open letters of credit (LCs) to import food items ahead of upcoming Ramzan as the banks are giving priority on opening LCs by the government and some big companies.
Direct government buy of edible oils and sugar from overseas sources is under consideration to secure timely and affordable supply of the essentials, especially to avert any crisis, bank sources said.
Meanwhile, the prices of the commodities hugely consumed during Ramzan have already registered a notable rise in a week, market insiders said.
Import crunch of goods amid upheaval on the dollar market and the hoarding of goods by a section of traders are the key reasons for such price hike, they added.
Mezbaul Haque, Executive Director and Spokesperson of the central bank, told The New Nation, "The number of LCs has not declined as around 15 hundred LCs, which was in normal time, are still opening per day."
He, however, said that the value of LCs has declined as the Bangladesh Bank imposed restriction on opening LCs of big amount to avert over and under invoicing.
According to Bangladesh Bank data, the country's state-owned commercial banks spent 80 per cent of their foreign exchange on government imports in the first six months (July-December) of the current fiscal year (2022-23).
During the time, central bank sold $7.8 billion. Of the amount, $7.2 billion was injected into the state-owned banks for imports of food, fertilizers and fuel.
Goods worth $10.68 billion were imported through state-owned banks in the six months period. Of this, the government imported goods worth $8.41 billion, which is 80 per cent of the total imports through state-owned banks, the data showed.
The sale of dollars to private banks has been stopped for several months due to rapid dwindling of foreign exchange reserves.
The central bank gives dollars only for import goods by the government and if it feels that the goods brought from abroad are really necessary. "Usually, the government imports products include
rice, wheat, fertilizers and fuel oil, which are unavoidable and crucial for the country. That's why the banks are giving priority on it," Mezbaul said.
As a result, the concern among private importers over imports of essential goods before Ramzan is increasing.
They said that the demand for products like dates, gram, edible oil and sugar usually increases during the fasting month and they fear that the inflation may increase further, if the supply of the essentials is interrupted during the time.
DCCI President Sameer Sattar said that the LCs for importing goods is opening on the basis of bank-client relationship and in some case, application for opening LC is being disallowed as there is pricing problem.
"However, the central bank should supply dollars for importing essential commodities in order to ensuring sufficient supply in the upcoming Ramzan," he said.
