BB seeks removal of sales contract cap on imports to rein in commodity prices

Highlights:

• Bangladesh Bank urges lifting cap on sales contract imports
• Cap restricts bulk imports of essential commodities
• Sales contracts faster and cheaper than letters of credit
• Economists say reform would curb hoarding, price manipulation
• Rising essential prices heighten urgency before Ramadan
• Traders, bankers say consumers would benefit from lower costs

The Bangladesh Bank has urged the commerce ministry to lift the existing ceiling on imports under sales contracts, arguing that the move would ensure the timely supply of essential commodities, reduce import costs and help stabilise the domestic market.

In a letter sent to the ministry, the central bank called for the removal of the cap to facilitate larger bulk imports of daily necessities such as rice, lentils, chickpeas, dates, onions, garlic, ginger and soybean oil.

Currently, imports under sales contracts are limited to $5,00,000 per transaction, a restriction that traders say makes it impossible to bring in bulk consignments. Essential commodities are typically imported by sea in shipments worth between $2 million and $2.5 million, far exceeding the existing limit.

Infograph: TBS

The Bangladesh Bank, economists and business leaders believe that allowing unrestricted imports under sales contracts would enable faster market supply, reduce opportunities for price manipulation and keep consumer prices relatively affordable.

Traditionally, most consumer goods in Bangladesh are imported through Letters of Credit (LCs), which involve contractual obligations between domestic and foreign banks. Under this system, banks act as guarantors, ensuring payment and product quality. However, the process is time-consuming and costly.

By contrast, a sales contract is a direct agreement between the exporter and the importer, without a bank acting as guarantor. As a result, both time and transaction costs are significantly lower.

According to Bangladesh Bank data, during the first four months (July-October) of the current fiscal year 2025-26, imports worth $60.40 billion were executed through LCs, while $7.64 billion came through sales contracts – accounting for just 12.65% of total imports.

A senior Bangladesh Bank official said the central bank had written to the commerce ministry at the end of 2025, ahead of Ramadan, seeking the removal of the cap.

Infograph: TBS

"The governor's position is clear – imports under sales contracts are faster and help maintain market stability. However, we have yet to receive a response from the commerce ministry," the official said.

The move comes as prices of essential goods have begun rising again after several months of relative stability. Traders have blamed delays in cargo clearance at Chattogram Port, while consumer rights groups point to weak market monitoring.

Within a week, wholesale prices of key Ramadan commodities – including edible oil, sugar, chickpeas and lentils – have increased by Tk3 to Tk5 per kilogram, raising concerns about further retail price hikes.

'Such import restrictions not beneficial for economy'

Governor Ahsan H Mansur told TBS that such import restrictions are not beneficial for the economy.

"If imports under sales contracts are made easier, the market becomes stronger and hoarding can be prevented. Most countries use sales contracts for importing essential goods," he said.

In many European countries, reliance on LCs in consumer goods trade is limited, with sales contracts preferred for their efficiency and reduced procedural complexity.

Bankers argue that LC-based imports involve various charges, including commission and confirming fees, which ultimately increase product prices. A senior official of a state-owned bank said that for a $2 million LC, commission and confirming charges alone could amount to nearly Tk3 million.

In contrast, a sales contract typically involves only a nominal opening charge of around $100.

Another Bangladesh Bank official said many foreign sellers now prefer sales contracts over LCs, but regulatory restrictions prevent Bangladeshi importers from fully utilising that option.

"Removing the cap would benefit everyone, from small traders in Khatunganj to large conglomerates," the official said.

Flexibility for market competitiveness

While 60-70% of Bangladesh's exports are already conducted through sales contracts, economists argue that similar flexibility is needed in imports to ensure market competitiveness.

Arief Hossain Khan, executive director and spokesperson of Bangladesh Bank, said the central bank has formally sought approval to liberalise sales contract imports in line with global practices.

"Facilitating imports through sales contracts will reduce costs. We want imports under this mechanism to remain aligned with market needs," he said, adding that due attention must be given to preventing trade-based money laundering when opening LCs.

Zahid Hussain, former lead economist at the World Bank's Dhaka office, said prompt import arrangements are essential to prevent artificial shortages and price manipulation.

"If traders know that any price increase will immediately trigger additional imports, the tendency to manipulate the market will decline," he said.

Business leaders echoed the view. Mohammad Hatem, president of the Bangladesh Knitwear Manufacturers and Exporters Association, said he once incurred losses of Tk4 crore due to high LC-related charges.

"Had it been under a sales contract, this loss could have been avoided," he said.

A senior official of Meghna Group said lower import costs under sales contracts would directly benefit consumers.

Sirajul Islam, president of the Bangladesh Fresh Fruits Importers Association, said lifting the cap would provide importers with much-needed flexibility.

"Ultimately, this will benefit the country," he said.