Fall in L/Cs settlement signals stagnation in industrial activities

Despite sufficient supply of US dollars in the country at the moment, the settlement of letters of credit for imports decreased in August. It mainly results from decline in imports of capital goods which indicates stagnation in new industrial activities. 

Industry insiders say L/C settlement has decreased due to decrease in opening new LCs in the last few months and low pressure of overdue (expired or outstanding) LCs. 

At the same time, due to decrease in new investment, traders are more inclined to import consumer goods instead of raw materials and equipment.

According to Bangladesh Bank data, the amount of import liability settlement in August this year stood at US$4.88 billion, which was $5.48 billion in August last year. 

Settlements have decreased by 10.94 per cent. However, the amount of new LC opening during this time increased by 3.06 per cent to $5.38 billion, which was $5.22 billion in August the previous year.

In fiscal 2024-25, which has just ended, the amount of LC opening for imports in the country increased by less than one percent. While LCs worth $68.89 billion were opened in fiscal 2023-24 it was $69.01 billion in the last fiscal. Despite the increase in size of the economy and population imports practically remains stagnant.

According to the data, the biggest decline in 2024-25 was in import of industrial capital equipment. While LCs worth $2.34 billion were opened in this sector in the 2023-24 fiscal year, it came down to $1.75 billion in the last fiscal year. 
That is, capital equipment imports have decreased by 25.41 per cent in a year. Earlier, in the 2022-23 fiscal there was a decline of about 24 per cent in this sector.