Short-term foreign loans allowed for import

Businesses will be able to import eight essential items centring upcoming Ramadan by taking short-term loans from foreign sources, said Bangladesh Bank yesterday. 

This facility for edible oil, chickpea, pulse, pea, onion, spices, sugar and date will remain applicable till March 2023, according to a central bank notice.

Importers will have to settle the letters of credit (LCs) within 90 days under supplier's and buyer's credit.

Buyer's credit refers to finance for payment of imports arranged by the importer or buyer from a bank or financial institution outside of Bangladesh.

Supplier's credit refers to credit extended for imports directly by the overseas supplier instead of a bank or financial institution.

A BB official said a majority of banks have been facing a shortage of dollars in recent months, which was why they were showing reluctance to open LCs for import, and the new facility would give respite to banks.

Earlier this week, the central bank asked banks to take a minimum cash advance, known as LC margin, from importers while opening LCs for the commodities in order to keep their prices at a tolerable level during Ramadan and ensure smooth supplies.

The central bank does not set any margin on the import of commodities and it is usually determined based on bank-client relations. Banks can even decide to refrain from imposing any margin.

But in July, the BB asked banks to take up to 100 per cent of import payments in advances from businesses while opening LCs for luxury and non-essential items, in an effort to keep the foreign exchange reserves stable.

The reserves fell from $39.60 billion in July to $33.92 billion on December 7.