Bangladesh witnessed its highest Letter of Credit (LC) openings in 23 months, amounting to US $6.83 billion in May 2024, amid an ongoing foreign exchange crisis, according to Bangladesh Bank. Previously, the highest LC opening was recorded in June 2022, reaching $7.02 billion. Since then, fluctuating dollar exchange rates and the domestic currency, the taka, have generally led to a decreasing trend in LC openings. In April 2024, LCs worth $5.68 billion were opened. The figures for May show a significant increase of more than 20 percent compared to April. Compared to the same period in 2023, LC openings in May rose by 19.5 percent. What to Consider Before Taking a Personal Loan from a Bangladeshi Bank Economists and market analysts attribute this trend to several factors, including tax benefits at the end of FY 2023-24 and the anticipation of the withdrawal of tax exemptions on various products in the FY 2024-25 budget. Dr. Ahsan H Mansur, Executive Director of the Policy Research Institute (PRI), explained to UNB that the increase in LC openings in May was influenced by a more lenient import policy on some items towards the fiscal year's end. Additionally, traders rushed to open LCs fearing further increases in dollar exchange rates after the central bank raised the rate by Tk 7 in a single move on May 8, 2024, he added. Trade analyst Dr. M. Mashrur Reaz noted that the increase in LC openings after a long period was also due to an improved dollar supply, thanks to remittances and foreign loan disbursements. Bangladesh needs green growth to achieve its vision of upper middle-income country by 2031: WB Despite ongoing macroeconomic instability in Bangladesh, trade volume and business transactions have increased in recent months. Government policy support on capital imports also impacted LC openings, Dr. Reaz observed. Furthermore, the announcement of new taxes on capital machinery imports in the FY 2024-25 contributed to the spike in LC openings. Capital machinery imports were tax-free until now, Dr. Reaz pointed out.

Despite fulfilling the criteria of 100 percent margin, importers cannot open letters of credit (LCs) from the banks for importing cars, pushing this business to dire straits. Businessmen said this during the second meeting of the Federation of Bangladesh Chambers of Commerce and Industries (FBCCI) standing committee on automobile in Dhaka Thursday. In Bangladesh, cars have long been considered luxury items, and the government has imposed a 100 percent LC margin on importing cars to deal with the dollar crisis. However, in the context of the country's current economic growth, cars have appeared as a necessary item, they said. "There is no alternative to trucks and pickups for goods transport on the road. These vehicles kept the supply chain running during the height of the Covid-19 pandemic," the businessmen said. They urged the government to keep cars out of the luxury list and called for incentives for hybrid cars like in other countries. Read: Automobile industry lacks policy to grow in Bangladesh: FBCCI In contrast to the global trend, in Bangladesh, the Bangladesh Road Transport Authority BRTA does not register electric vehicles. So, businessmen urged the government to introduce registration policies for electric vehicles. FBCCI Vice-President and Director in-charge of the committee Md Habib Ullah Dawn said: "During this global crisis, we agreed with a 100 percent LC margin decision, but the banks do not want to open LCs and discourage us through continuously seeking different documents." Also, the businessmen demanded amending the rule of mandatory driving licence while purchasing a motorcycle, harassment-free issuance of driving licence, specific HS code for an electric vehicle, registration for three-wheelers and sector-friendly policy support.

Standard Chartered Bank has executed the country’s first blockchain transaction by issuing a Letter of Credit (LC) for Viyellatex Ltd over the Contour blockchain network.