LC openings drop 12% in Oct amid cautious imports, lower investment

Import letters of credit (LCs) opened in October fell by more than 12% year-on-year, reflecting reduced demand for imports and sluggish new investment in the economy, according to central bank's latest data and banking sector insiders.

LCs worth $5.64 billion were opened in October 2025, down from $6.42 billion in the same month last year – a decline of 12.15%. The figure was also lower than $6.31 billion recorded in September this year.

Meanwhile, LC settlements, payments made against previously opened LCs, also dropped by 11.48% year-on-year, falling to $5.40 billion in October from $6.10 billion in the same month last year.

Economists and bankers say several factors contributed to the decline. Many importers had already opened LCs earlier in the year for Ramadan-related consumer goods, while demand for liquefied natural gas (LNG) also tends to fall before winter.

Bangladesh Bank Chief Economist Professor Dr Mohammad Akhtar Hossain said, "Most essential goods needed for Ramadan were already imported earlier, and there was sufficient supply in the domestic market."

"That's why the pressure to open new LCs in October was not high. Moreover, there is adequate dollar supply in the banking system, with no shortage or volatility in the exchange rate," he added.

Md Ahsan-uz Zaman, managing director and CEO of Midland Bank, echoed similar views, saying, "Imports related to Ramadan were completed in advance, which slightly reduced imports this month. Also, it's not always the case that large amounts of LCs are opened every month – sometimes big government projects influence the monthly totals."

A senior treasury official at a private bank noted that government LC openings remained steady, but private sector LC growth was sluggish. "LNG import LCs usually decline before winter, and that has also been a factor," he added.

Speaking to TBS, a Petrobangla official also confirmed that LNG import LCs remain low till December, noting that September's figures had also fallen.

Economists and bankers also pointed to a broader decline in new investments due to the overall economic and political situation. 

Akhtar Hossain said, "There is a slowdown in new investment, which has reduced imports of capital machinery. As a result, overall LC openings for imports are believed to have decreased."

"If the political situation improves, investment will rise again, and the overall economic condition will get better," Ahsan-uz Zaman said.

A private bank's treasury head echoed this view, saying, "Once political stability returns after the election, LC openings will increase again. Many large corporate groups have reduced LC activity, but several firms are expected to resume operations once political decisions are settled."

According to Bangladesh Bank data, net equity inflows (new investment) fell sharply to $81 million in the June quarter – a 62% drop from $214 million in the same period last year. Private sector credit growth also slowed to 6.29% in September, the lowest in four years. 

Since 5 August 2024, private sector lending growth has been steadily declining, reflecting the slowdown in investment demand.

The Bangladesh Bank chief economist also noted that tighter scrutiny on trade transactions has helped curb money laundering disguised as import payments.

The central bank chief economist also noted that LC openings declined in October partly because money laundering through import over-invoicing has been curbed. 

"In the past, a large number of LCs were opened under the pretext of rising demand, but a significant portion of those funds was actually laundered abroad," he said. "Now, much stricter measures have been implemented. With reduced opportunities for illicit transactions, LC openings have declined as well."