Import of capital machinery and raw materials for industry has been decreasing rapidly as some of the banks have been depriving a section of the customers, intending to borrow from the banks against letter of credit (LC), to pay cent percent of LC margin while some others have been getting extra privileges on the pretext of bank-customer relations.
A section of importers are being allowed to import against bank loan of 100 per cent LC margin before the imported products enter the country while some are being compelled to keep deposits in the bank till the products arrive.
Same time, the import of such things is also decreasing due to the ongoing dollar crisis since last year and higher price of dollar than the price fixed by the Bangladesh Bank and Bangladesh Foreign Exchange Dealers Association (BAFEDA).
Although there is a provision of 100 per cent letter of credit (LC) margin in the case of import of broken stone, finished goods, cars, TV, fridge and luxury goods, many banks are not complying with it because of bank-customer relations.
Infratech Construction opened LC with National Bank to import crushed stone. At the time of opening the LC, the bank deposits 100 per cent cash margin of Tk 2 crore. From the loan money given by the bank. LC withdraws the full amount of margin before the goods arrive in the country.
Sources said the banks easy business comes from trading in luxury and manufactured goods. Businessmen in these sectors are influential and connected with bank owners. Again, instead of controlling the dollar market and preventing money laundering and hundi, the crisis has increased in many cases due to the imposition of various decisions on the banks.
Foreign exchange reserves are now down to $20 billion. The dollar price for imports is fixed at Tk 110 through central bank, but the traders have to buy at Tk 123 to Tk 124. Extra money has to be paid in various unethical ways. In addition to business, many people are not getting dollars when they go out of the country for various purposes including medical, education and travel.
Expatriate beneficiaries and repatriates are being paid high interest on dollar deposits to bring the dollars in hand or held by expatriates to the bank. In this situation, on the advice of IMF, the central bank has announced the introduction of a new method of selling dollars, crawling peg. In this way Bangladesh Bank will fix an intermediate rate of dollar.
A percentage of maximum increase and decrease will be fixed with it. Abul Kashem Khan, the former president of Dhaka Chamber of Commerce and Industries (DCCI), said that despite the Central Bank taking various initiatives, the dollar market has not recovered; Rather, the crisis is increasing day by day. Only those who have a good relationship with the bank are getting dollars for imports. Buying dollars at the individual level is also gaining momentum.
He said that due to artificially fixing the dollar rate, much higher rates are available outside the banking channel. Many are now bringing money from outside the country outside the banking channel. As a result, the initiatives taken by the central bank need to be reformed. Emphasis needs to be given on how to increase exports and remittances.
According to the data of Bangladesh Bank, imports are decreasing this year after the last financial year due to various regulatory measures. In the first six months of the current fiscal year, LC settlement for various goods has declined by over 18 per cent to US$3,368 million. Imports of industrial raw materials and capital equipment decreased the most.
LCs of industrial raw materials fell by over 31 per cent to $1,540 million as of December. LC settlement of capital equipment fell by nearly 27 per cent to $1.43 billion. Last fiscal year, imports fell by 16 per cent to 6,950 million dollars. Of this, the import of capital goods fell by more than 24 per cent and the import of intermediate goods by about 22 per cent. An easy way to understand whether a countrys production and employment is increasing is on the import of capital machinery and raw materials of industry.
Imports of these two products have decreased in recent times compared to luxury goods. Bangladesh Bank Governor Abdur Rauf Talukder said in response to a question at the monetary policy announcement ceremony on January 17, it is very difficult to directly ban the import of any product due to the World Trade Organization without imposing import controls.
The managing director of a private bank said that trying to control the dollar market by reducing imports has been counterproductive for the economy. This reduces the GDP growth, the government loses revenue as well as the income of the banks. Many large companies are unable to make profits or recoup their investments.
Due to these reasons, new industries are less developed. Many factories are closing because they cannot bring raw materials. Some factories are operating at half capacity. Even if these factories default in the future, there will be nothing to say. Again new employment will decrease. Many will be unemployed again. Export earnings will decrease in the long run. Spokesperson and Executive Director of Bangladesh Bank.
Mesbaul Haque said that the pressure in the dollar market has decreased a lot. Imports of daily necessities during Ramadan increased by 10 to 15 per cent compared to the same period of the previous financial year.
The crisis in the dollar market started after August 2021. Since that time, the central bank has sold about 29 billion dollars to overcome the crisis. Since it did not work, the government and the central bank took the initiative to control imports from the middle of 2022.
First, duty was increased and LC margin was imposed at 100 per cent. After that the central bank starts verifying every major LC. As this did not work, ABB and BAFEDA are fixing a dollar rate through the mediation of the central bank from September 2022.
