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The central bank has asked banks to take a minimum cash advance from importers while opening letters of credit (LCs) for rice and wheat in order to keep their prices at a tolerable level in the domestic market and ensure smooth supply.
The advance payment, also known as the cash LC margin, should be kept at the minimum level depending on the bank-client relationship, Bangladesh Bank said in a notice yesterday.
The central bank’s directive comes at a time when rice imports by the private sector remains low despite five months having passed since the government started allowing businesses to import the staple grain in a bid to rein in its spiralling prices.
Importers linked the sluggish imports to the banks’ apathy in opening letters of credit (LCs) to facilitate shipments of the grain, and risk of losses for lower prices in the domestic market amid the ongoing Aman rice harvesting season.
Traders also said a section of them allege that banks were demanding up to 100 per cent cash margins to open LCs, which was difficult for many to arrange.
The food crop prices are showing an upward trend owing to disruptions in the global supply chain caused by the Russia-Ukraine war. As a result, the transport cost of global commodities has gone up, affecting prices in the local market.
In the past one month, the prices of wheat flour rose 9 per cent to Tk 60-63 per kilogramme (kg) in Dhaka, a reverse from the global trend, said officials of the commerce ministry in early December. The price of the grain dropped 6.13 per cent globally during the period.
Similarly, the price of coarse rice was 6 per cent higher year-on-year at Tk 48.09 per kg in November, data from the Food and Agriculture Organisation showed.
“So, it is important to keep the prices of rice and wheat at a tolerable level in the local market and ensure a smooth supply,” the central bank said.
Bangladesh Bank does not set any margin on the import of commodities, and it is usually determined based on the bank-client relationship. As such, banks can even decide to not impose a margin at all.
In July, the central bank asked banks to take up to 100 per cent of import payments in advance 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.
On December 10, the central bank also directed banks to take a minimum cash advance from importers while opening LCs for a number of essential commodities in order to keep their prices at a bearable level during Ramadan.
The demand for edible oil, gram, lentils, onion, spices and dates usually goes up during the fasting month. As a result, the prices of those items increase.
The prices of key items such as edible oil and sugar have already surged in Bangladesh for the higher import costs of raw materials, escalated transport and fuel costs, and the energy shortage, driven mostly by the war.
(TDS)
