The opening of letters of credit (LCs) for imports in Bangladesh witnessed a significant decline of 28.52% in the fiscal year 2022-23. The government and the Bangladesh Bank introduced various conditions on imports to address the decreasing foreign exchange reserves. LC openings dropped from $92.23 billion in FY22 to $65.92 billion in FY23, reflecting the impact of austerity measures implemented by the central bank. These measures included imposing a 100% LC margin on luxury and non-essential items, as well as requiring banks to inform the regulator 24 hours prior to opening LCs exceeding $3 million. While these initiatives helped ease pressure on the forex market, some banks faced challenges in financing projects due to restricted imports. Despite the decline in LCs, the Bangladesh Bank continued to supply USD into the market, selling around $14 billion in FY23 to support import payments. However, the country’s forex reserves have been decreasing since August 2021, reaching $31.16 billion by July 2023 compared to $41.88 billion in the previous year.
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