Dhaka Bureau: The dollar crisis that started in Bangladesh last year did not end even in the new year. Businessmen say that they are unable to open an LC at the bank due to a lack of dollars. They are struggling to meet the import price. Although it has been said several times before by Bangladesh Bank, the dollar crisis will begin to ease in the new year. But no solution to the crisis is in sight.
Not only luxury goods but also essential goods LCs are not being opened. From industrial raw materials to essential goods, imports have been blocked.
Meanwhile, the LC’s opening for the import of raw materials by small and medium industries has reduced drastically due to the dollar crisis, the devaluation of the currency, and the increase in prices in the international market. The production capacity of many establishments has also decreased.
According to the instructions of the central bank, the bank is not able to pay dollars even though 100% of the money has been paid for the import. To counter the dollar crisis, the central bank has imposed various restrictions to discourage imports of non-essential goods. Even in non-luxury products, however, a 100% margin is maintained.As a result, they are forced to collect raw materials from the open market at high prices and try to keep the factory running. Businessmen say that those who do not earn in dollars are also unable to open an LC account now. Among them, the industries that produce products to meet domestic demand are also not able to open LC.
The Ministry of Commerce had decided at the beginning of December to assist the import of seven products on an urgent basis in view of the coming month of Ramadan. Bangladesh wrote to the Bank, requesting priority assistance in importing these products.About 250 million dollars will be needed to import these products. At that time, the government had also announced the opening of a crisis management cell to deal with the liquidity problems of traders. But even in early February, traders say, the situation has not improved. According to businessmen, the situation has not improved much since the crisis began with the opening of credit letters for the import of goods five to six months ago.
When asked about this, Bangladesh Chamber of Industries (BCI) president Anwar-ul Alam Chowdhury Parvez said that the dollar situation has not improved. All sectors are facing difficulty opening LCs due to the dollar crunch. Comparatively, the ready-to-wear industry is doing slightly better. because they can open back-to-back LCs. But entrepreneurs in other sectors said they were facing problems opening the required LCs. Many people are able to bring raw materials in at a lower price than the demand through LC. As a result, production is decreasing more than before. Those who rely on imports to supply the country are particularly vulnerable.
According to Bangladesh Bank sources, due to the dollar crisis in the country and global commercial instability, there has been a huge decline in the import of capital machinery, industrial raw materials, intermediate goods (raw materials for industry), and consumer goods.
Imports of capital machinery stood at $1.27 billion during July–December of the current financial year, compared with $3.67 billion during the same period of the fiscal year 2021–22. At the same time, the import of consumer goods and industrial raw materials in July–December of the current fiscal year 2022–23 was 4.12 and 1.20 billion dollars, respectively. which was 4.69 and 1.65 billion dollars, respectively, in the 2021–22 fiscal year.
Bankers say foreign trade is in turmoil because of the Russia-Ukraine war. The demand from foreign buyers to import garments from the country has decreased. At the same time, due to a shortage of dollars in the country’s banks, traders are not able to import despite the demand. Due to this, all types of imports have decreased.
Between July and December of the current fiscal year, the import of intermediate goods was 2.58 billion dollars. which was 3.87 billion dollars in the same period of the previous year. Accordingly, the import of intermediate goods decreased by 33.18 percent during this period of the current financial year.
Treasury department officials of several banks said that the number of LCs opened by private banks is very low. because they are focusing more on collecting dollars than opening LC at this time. In addition, due to the increase in the price of products in the international market and the increase in the price of the dollar, the cost of imports is higher than that of the products. The product, which used to be bought for 100 taka, now costs around 120 taka. As a result, the amount of various products imported is lower.
On January 15, Bangladesh Bank Governor Abdur Rauf Talukder said, “We have many unnecessary LCs.” Furthermore, there has been a lot of over- and under-invoicing via imports.Now we are keeping a close watch on all imports, which has reduced over- and under-invoicing a lot.
Bangladesh Bank says the dollar crisis will be eliminated by increasing remittances and controlling import costs. But experts say import control is not a solution. If this continues, business will cease. However, Bangladesh Bank Governor Abdur Rauf Talukder recently said that it will take a few more days to overcome the dollar problem.
The central bank is forced to sell dollars from reserves due to low remittances. In 2022, Bangladesh Bank sold 12 billion dollars to various public and private banks. Despite that, the dollar crisis has taken dire shape.
When asked about the import, Bangladesh Paper Importers Association President and FBCCI Director Shafiqul Islam Bharsa told Ittefaq that paper cannot be imported even with a 100% LC margin due to the dollar crisis. They are not able to open LC despite repeated dharnas at the banks.
