The country’s businesses have opened letters of credit (LCs) worth $ 7.18 billion in August, which stands at Tk 61 thousand 424 crore according to the current exchange rate (per dollar Tk 85.50).
According to the Bangladesh Bank (BB), the number of LC openings increased by 48.60 percent in the first two months (July-August) of the 2021-22 financial year after relaxation of the Covid-19 pandemic restrictions.
Business activities in the country have become almost normal as the government allowed the opening of all kinds of economic activities over the last few months, especially due to rolling-out of Covid-19 vaccination in the country, said an official of the Central Bank.
"It is a record in opening of LCs as such a huge amount of foreign currency has not been spent to open an LC for importing goods in a single month," said an official of the central bank that regulates currency management.
A letter of credit (LC), also known as a documentary credit or banker’s commercial credit, or letter of undertaking (LoU), is a payment mechanism used in international trade to provide an economic guarantee from a creditworthy bank to an exporter of goods.
Letters of credit are used extensively in the financing of international trade, when the reliability of contracting parties cannot be readily and easily determined. Its economic effect is to introduce a bank as an underwriter that assumes the counterparty risk of the buyer paying the seller for goods.
In the last two months of the current fiscal year, LCs worth $12.13 billion have been opened for importing various products, which was $ 8.16 billion in the same period of the last year, as per the BB data.
According to the data, in July-August of the fiscal year 2021-22, banks opened LCs worth $ 4.47 billion for the import of industrial raw materials which was 50 percent more than in the previous financial year. LCs worth $ 87 crore 10 lakh have been opened for the import of capital equipment which increased by 11.6 percent from that in the same period of the previous year.
LCs have been opened for inter-industry products worth $ 97.39 billion. LCs for importing other industrial equipment have been opened for $ 338.90 crore, which was increased by 49 percent from the last August of previous year, said BB data.
Alongside, importing fuel oil worth $ 94.33 billion of LC has been opened and LCs for food products (rice and wheat) imports have been opened at a cost of $147.86 billion which is 63 percent more than that in the previous fiscal year.
Economists and business leaders said alongside the foreign trade, the domestic economy has also become dynamic as the Corona situation has become normal especially in different countries of the world including Europe-America. People in those countries have started buying products as before to lead a normal life.
Meanwhile, the situation of Covid-19 in the country is also becoming normal and the number of deaths and infections across the country is declining. Overall the demand for all types of products has increased domestically and internationally as businesses have started to open LC for fulfilling the country’s needs, they added.