Bangladesh’s imports fell sharply in the immediate past FY23 as opening of letters of credit (LCs) dipped due to scarcity of US dollars and restrictions on the purchase of luxury items from external sources.
Private and public entities opened LCs of $69.36 billion in FY23, down 26% year-on-year from $94.26 billion a year ago, according to Bangladesh Bank data.
In the face of rising pressure on the country’s foreign exchange reserves and volatility in the exchange market as imports were higher than exports and remittances, the central bank started tightening measures to discourage imports.
It asked banks to take up to 100% of import payments in advances from businesses and started monitoring imports amounting to $3 million and above before allowing businesses to open LCs, to stop the depletion of the reserves.
Still, the country’s reserves fell 25% year-on-year to $29 billion on July 26 from a year ago, BB data showed.
Data for the July-May period of the fiscal year showed that the opening of LCs for capital machinery nosedived.
During the 11-month period, businesses opened $2.69 billion worth of LCs to import capital machinery, which was 55% lower year-on-year.
The LC opening for the import of industrial raw materials slumped 30% to $21.17 billion.
The ratio of decline was 24% for intermediate goods, according to the BB.
Overall, businesses opened 18% lower LCs at $7.14 billion in July-May.
