Banks asked to curb non-essential imports
The Bangladesh Bank yesterday ordered banks to immediately adopt strict measures to discourage imports of non-essential items in a bid to rein in the escalating import payments and avert any pressure on the foreign currency reserves.
This is the first such move from the central bank in nearly two decades, as pressures are mounting on the reserves and the exchange rate amid economic volatility globally, said an official of the BB.
Now banks have to impose at least 25 per cent margin on the opening of letters of credit for non-essential consumer goods. This means importers have to deposit at least 25 per cent of the total import costs while opening LCs.
The central bank said baby food, fuel oil, life-saving drugs, and the products for the farm, export and local industrial sectors would be out of the purview of the new instruction.
The move is part of the BB efforts to run the monetary and credit programmes properly given the ongoing global state of affairs, according to a BB notice.
Banks have been asked to implement the instruction with immediate effect.
Economists and analysts have recently suggested the central bank discourage non-essential imports to keep the country's foreign exchange reserves stable as higher commodity prices owing to persisting supply chain disruptions and the Russia-Ukraine war sent import payments higher.
Imports stood at $54.37 billion in the first eight months of the current fiscal year, an increase of 46.7 per cent year-on-year, data from the BB showed.
As a result, the trade deficit, which occurs when the value of imports exceeds the value of exports, totalled $22.30 billion in the July-February period in contrast to $12.35 billion recorded during the same period a year ago.
The widening of the trade gap has intensified pressures on the exchange rate of the taka against the US dollar, which will ultimately reduce the foreign exchange reserves as well.
The exchange rate stands at Tk 86.20 per US dollar from Tk 84.80 a year ago.
The foreign exchange reserves, which surpassed $48 billion in August last year, declined to $44.24 billion on April 6, enough to cover import payments for five months.
The reserves are dwindling because of the higher imports against lower-than-expected exports and remittance flow.
Between July and February, export receipts from merchandise shipments grew 30.86 per cent to $33.84 billion, while the country received $15.30 billion in remittances as of March of FY22, a fall of 21.56 per cent.
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