Import LC opening highest in 11 months in January

Infographic: TBS

Import letters of credit (LCs) opened in January climbed to $6.61 billion – the highest in 11 months – as businesses stepped up purchases ahead of the national election and the fasting month of Ramadan.

A senior official of the Bangladesh Bank confirmed the figures, adding that LC openings in January last year stood at $6.85 billion. LC settlements in January this year amounted to $6.16 billion.

Bankers and central bank officials, while talking to TBS, attributed the surge to increased imports of essential commodities ahead of Ramadan and a renewed sense of business confidence surrounding the February elections. Traders also brought in some capital machinery in anticipation of improved economic conditions.

Mohammad Ali, managing director and CEO of Pubali Bank, said LC openings typically rise before Ramadan due to higher imports of consumer goods.

"Rice, pulses, edible oil, and dates are imported in larger quantities ahead of the fasting month. LC openings generally increase during this period compared to other months," he said.

Syed Mahbubur Rahman, managing director and CEO of Mutual Trust Bank, said imports of essential commodities have increased in preparation for Ramadan, while the February elections created some optimism among businesses, prompting limited imports of capital machinery.

"If the overall business environment improves, new investments will follow, which will further boost imports of capital equipment," he said, adding that banks currently have adequate dollar liquidity. 

Mahbubur further said, "There is no shortage of dollars, and businesses can access foreign currency to open LCs as needed."

However, a treasury head at a private bank noted that private sector credit growth has slowed since August 2024, reflecting subdued new investment and trade activity. 

"Without new business expansion, demand for capital machinery remains limited, which in turn affects LC openings," he said.

Essential food items in high demand during Ramadan include rice, wheat, edible oil, sugar, lentils, onions, garlic, chickpeas and dates. 

According to the Ministry of Commerce, demand during Ramadan alone is estimated at 3,00,000 tonnes for soybean oil, 3,00,000 tonnes for sugar, 5,00,000 tonnes for onions, 1,50,000-200,000 tonnes for chickpeas, and 60,000-80,000 tonnes for dates.

Data from the National Board of Revenue show that over the past four months, imports included 2,25,000 tonnes of onions, 3,70,000 tonnes of sugar, 47,000 tonnes of dates, 2,05,000 tonnes of lentils, nearly 4,00,000 tonnes of crude soybean oil and 1,40,000 tonnes of wheat.

The January spike in LC openings suggests a seasonal boost in trade activity, though sustained momentum will depend on broader improvements in investment and business confidence.

Private credit growth below 7%

Bangladesh Bank data shows that private sector credit growth stood at 6.10% at the end of December, remaining below 7% for seven consecutive months. This indicates that businesses are borrowing less for trade and investment.

According to bankers, major conglomerates – including Meghna Group, City Group, Square Group, Edible Oil Limited, Bashundhara Group and TK Group – have already imported most of the goods required for Ramadan.

Data also shows that imports of six essential items that are widely consumed during Ramadan rose sharply in September and October compared with the same period last year. 

Soybean oil imports increased by 36%, sugar by 11%, lentils by 87%, chickpeas by 27%, split peas by 294% and dates by 231%.