The opening and settlement of LC has steadily declined in recent months. Despite the decline in LC opening and settlement, imports have not declined in comparison. And the trade deficit has increased because imports are more than exports.
According to Bangladesh Bank data, a total of $5.7 billion LCs were opened for the importation of various products in September this year. That is $630 million or 9.95 percent less than the previous August. In addition, LC’s settlements fell more than 18 percent in September to $6 billion from the previous month. Both the opening and settlement of LC decreased compared to the same period last year (September).
The war between Russia and Ukraine started as the economy returned to normal following the global coronavirus pandemic. As a result, the price of goods in the world market has risen several times. As a result, the world plunged into another serious economic crisis. In this situation, Bangladesh took initiatives to save dollars by reducing imports. At the same time, the Central Bank has tightened supervision to properly channel the remittances and exports of income money to the banking channel. Despite the increase in remittances in the banking channel in August this year, it fell in September. At the same time, the country’s exports also declined after 13 consecutive months of positive growth. This has led to new concerns about foreign earnings.
According to the data from the central bank, the amount of the opening and settlement of LC started to decrease from July this year. Last June, the opening amount of LC was $8.44 billion, in July it fell to $6.35 billion. LC openings fell further in August to $6.33 billion. And in the last month of September, the amount fell to $5.7 billion.
However, compared to the rate at which LC gaps have declined, LC settlements have not declined to the same extent. Last June, the LC was settled for $7.5 billion. In the following month, July, the amount fell to $7.35 billion. LC’s settlement fell to $7.32 billion in August. In the last month of September, it fell further by 132 crores to 600 crores.
According to the Bangladesh Bank report, LC was settled at $685 million in January this year. 656 crore was settled in February, 767 crore in March, 693 crore in April and 705 crore in May. In the nine months of this year, 6 thousand 354 million dollars LC was settled with this.
Meanwhile, despite the drop in imports into the country, the dollar crisis is not going away anytime soon. In this situation, Bangladesh Bank has increased the sales of dollars to overcome the crisis in the market. So far, the central bank has sold $3.5 billion in the current fiscal year. And in the entire period of the last fiscal year, 762 million dollars were sold.
The sale of dollars from the central bank’s foreign exchange reserves has also increased the pressure on reserves. Reserves totaled $48 billion in August of last year (2021). Currently, the amount of this reserve has fallen to $36 billion.
Meanwhile, in order to solve the dollar crisis and increase the income of expatriates, commercial banks have set the price of the dollar themselves. The award was decided in a joint meeting of the Banking Directors Association of Bankers Bangladesh (ABB) and Bangladesh Foreign Exchange Authorized Dealers Association (BAFEDA).
According to the price announced by Buffeta, the bank can buy a maximum of 107 taka 50 paisa per dollar in case of remittance. Commercial transfers and export bills will be collected at Tk 99 per dollar. In addition, the banks sell dollars to the importer by adding a maximum of one taka to the average (weight and average) price of the banks for collecting remittances and collecting export accounts. Last month in September, the highest purchase rate for buffer transfers was Tk 108.
According to the Bangladesh Bank website, the banks determine the dollar exchange rate for interbank transactions and customer transactions based on supply and demand and according to Fed guidelines. According to the latest information given on October 3, the price of the rupee against the dollar was highest at 104 taka 25 paisa and lowest at 102 taka 90 paisa.