The Bangladesh Bank has imposed further restrictions on the import of luxury goods to reduce the pressure of import expenditure on the economy.
The Bangladesh Bank (BB) has reset the letter of credit (LC) margin at 100 percent for importing non-essential products in order to offset the rising import costs and stave off pressure on forex reserves.
Besides, from now on, importers will not get any loan facility from the bank for importing all types of automobiles, electrical and electronics used as home appliances, cosmetics, gold ornaments, readymade garments, household electrical appliances or home appliances, beverages and many other products.
The central bank issued a circular in this regard and sent it to all concerned offices on Monday.
According to the circular, the decision comes against the backdrop of the long-term negative effects of Covid-19 and more recently the Russia-Ukraine War, which led to a more unstable global economy already rocked by the pandemic.
The BB move aims to further strengthen the country's monetary and debt management amid times of such volatility, added the circular.
The other products that fall under the central bank's latest directives – leather goods, jute products, cosmetics, furniture and decorative items, fruits and flowers, non-grain food products, processed foods and beverages.
Meanwhile, for – baby food, essential food products, fuel, life-saving drugs and medical equipment recognised by the Directorate General of Health Services (DGHS), directly imported capital equipment and raw materials for manufacturing-oriented local industries and export-oriented industries, essential commodities for use in government priority projects – the margin for LC ospening has been set at a minimum of 75 percent.
However, in case of importing these luxury goods, the importers have to deposit the full import price of the goods in the bank. Banks will not be able to give any kind of loan for import of these products.
The country's economy is under pressure due to the abnormal increase in import expenditure. The trade deficit has reached $30 billion.
As a result, the value of the dollar continues to rise. In the interbank money market now one has to spend Tk 93.45 for one dollar.
Banks are selling dollars at five and a half to six Taka more.
In this delicate situation, the central bank imposed more restrictions to reduce the import of luxury goods to curb the cost of imports.
The Central Bank guidelines said , importers must pay 100 percent cash on import credit for import of motorcars (sedans, SUVs, MPVs, and so on), electrical and electronics home appliances, gold and gold ornaments, precious metals and pearls, ready-made garments, leather goods, jute goods, cosmetics, furniture and ornaments, fruits and flowers, cereal food (such as non-food items, processed foods and beverages, such as canned food, chocolate, biscuits, juices, soft drinks and so on), alcoholic beverages, tobacco, tobacco products and other luxury goods.
In other words, if importers want to import a car worth Tk 1 crore, they have to pay the full amount in cash as the bank will not give any loan.
Earlier on May 10, the Central Bank instructed banks to take up to 75 percent of payments in advance from businesses during opening of letters of credit for import of luxury and non-essential goods.
On April 11, the banking regulator asked banks to impose a margin of at least 25 percent on the opening of LCs for non-essential consumer goods, but this failed to contain a rise in import payments.
Against this backdrop, the central bank took a tougher decision to contain imports by imposing high margin for LCs on 10 May.
As per the BB notice issued on the day, banks will have to impose a margin of at least 75 percent on the opening of LCs for electronic goods such as air conditioners, refrigerators and washing machines.