Import LC settlements plummet 10% in Nov amid economic slowdown

Highlights:

• LC settlements dropped 10% in November, signalling economic slowdown
• New LC openings also fell, though decline eased from October
• Reduced investment and weak private sector credit driving slowdown
• Businesses delaying capital machinery imports amid political uncertainty
• Low LC activity lowered dollar demand, easing forex pressure
• Bangladesh Bank bought $53m to stabilise exchange rates

Bangladesh is witnessing a significant slowdown in import activities, with Letters of Credit (LC) settlements falling by 10% in November compared to the same month last year, a clear indicator of economic stagnation and reduced business investment.

Data from the Bangladesh Bank shows that LC settlements – payments made against previously opened import LCs – dropped to $4.87 billion in November 2025, down from $5.38 billion recorded in November 2024. This follows a previous year-on-year decline of 11.48% in October.

The opening of new LCs, which dictates future settlements, has also decreased, though at a slightly slower pace. LCs worth $5.57 billion were opened in November this year, a 4.62% reduction from the $5.84 billion opened in the corresponding period last year. This is an improvement from October, which saw a 12% year-on-year drop in new LC openings.

Infograph: TBS

Slowdown linked to investment halt

Bankers and economists attribute the significant decline in settlements to a prevailing economic slowdown, reflected in the reduced growth of private sector bank credit.

A treasury head from a private bank told TBS that while the monthly average for import LC settlements typically ranges from $5.5 billion to $6 billion, the $4.87 billion settled in November is notably low.

"The main reason for this is the reduced number of LCs opened in July and August," the official explained. "Site LCs are settled about one and a half months after opening, while deferred LCs are settled six months later. Since LC opening picked up in September ahead of Ramadan, we might see settlement figures rise soon."

However, the core issue is the reluctance of businesses to invest.

Syed Mahbubur Rahman, managing director and CEO of Mutual Trust Bank, said, "The economy is somewhat stagnant. Capital machinery imports have declined, and the volume of private sector bank credit has fallen. 

"This indicates that businesses are not making new investments because the economy is in a sluggish mode. We might see this picture persist until the upcoming election, with a possibility of a turnaround afterwards."

Md Ahsan-uz Zaman, managing director and CEO of Midland Bank, agreed, "The slowdown in the economy may be causing fewer imports of capital machinery. Furthermore, there are various uncertainties about doing business in the country right now."

Bankers believe that a lack of new investment, hampered by political uncertainties, has reduced demand for capital machinery and raw materials, directly resulting in fewer LC settlements.

A senior Bangladesh Bank official confirmed this, noting, "There is no environment for new investment right now. Business is slow, so capital machinery imports are low. This reduces LC openings, which in turn reduces settlements."

Meanwhile, lower settlement volumes towards the end of November reduced dollar demand in the market, causing a decline in foreign exchange rates. To prevent excessive depreciation of the dollar, the central bank purchased $53 million from commercial banks on Sunday via auction – its first such purchase in two months. The move stabilised exchange rates, a senior banker confirmed.