Commerce to discuss dollar issue with central bank as essentials import falls

Commerce Minister Tipu Munshi on Wednesday assured importers that their proposal to keep a certain amount of dollars to facilitate imports of daily necessities will be discussed with the central bank.

Opening letters of credit against imports of essential commodities, particularly edible oil, sugar, chickpea and date that see a rapid surge in demand in Ramadan, have been on a sharp decline over the last quarter of 2022 due mainly to the ongoing dollar crisis, causing a fear of supply shortage and price hikes ahead of the fasting month.

Infographic: TBS

The commerce ministry's Task Force on Review of Commodity Prices and Market Situation, at its fifth meeting on Wednesday, presented data on LC opening and settlement for imports in October-December. All the figures were significantly lower than that of the previous year.

Traders, at the commerce ministry meeting, said the government has failed to address the dollar crisis for essential commodity imports despite repeated promises. Moreover, complexities in opening LCs for essential items have increased further thanks to various conditions imposed by banks.

As a consequence, there is now fear of a supply crunch of these essentials, they said, calling for preserving a certain amount of dollars for keeping imports of essential items normal.

"The commerce ministry will take bold initiatives so that there is no difficulty in the daily commodity imports. It will also help importers open LCs on a case-to-case basis," Tipu Munshi told traders.

"Even, we can arrange imports of particular goods without LCs under a special arrangement," he added.

Meanwhile, the Bangladesh Bank on the same day said overall LC opening fell 26.5% year-on-year to $32.39 billion in the second half of 2022.

According to the task force's data, LC opening for importing raw sugar decreased by 1.5 lakh tonnes in the last three months of 2022 compared to that of the previous year. LCs for crude soybean import fell to 88,000 tonnes from 1.67 lakh tonnes and soybean seed to 78,000 tonnes from 4.71 lakh tonnes.

Although the situation of LC opening for onion and lentil was comparatively good, traders have completely failed to open LCs for the imports of chickpea and date – the items most in demand in Ramadan. Besides, LC opening for palm oil import was nominal.

The meeting also analysed the data for the LC settlement from July to December 2022 and pointed out that the imports of sugar, crude palm oil, chickpea and dates were on a downward trend while that of soybean oil and onion remained normal.

Echoing the minister, Commerce Secretary Tapan Kanti Ghosh said they have the power to give approvals for the import of certain goods without LCs if necessary. "If anyone gets into complications in LC opening [for essential items] and reports to us, we will consider the matter," he added and suggested traders not to be worried as there is three more months to Ramadan.

According to the commerce ministry, demand for edible oil increases to 3 lakh tonnes in Ramadan while it is 1.5 lakh tonnes a month in normal time. Similarly, the demand for sugar doubled to 3 lakh tonnes, lentil to 1 lakh tonnes, onion to 4 lakh tonnes, chickpea to 1 lakh tonnes. Date consumption reaches 50,000 tonnes from only 5,000 tonnes.

Regarding sugar imports, traders demanded a reduction in import duty to take the retail price to an affordable level. In response, Commerce Minister Tipu Munshi said they will take steps to that effect. "A letter will be sent soon recommending the National Board of Revenue to reduce the duties."

"The way we are preparing, there should not be any problem in the supply of the essential items during Ramadan," the minister told reporters after the meeting. 

"Edible oil, chickpeas, lentils, onions, sugar and dates all have adequate imports and stocks in the country. But how much can be kept normal at length will depend on the dollar situation," he said and added that the matter of hope is that the dollar price is now on the decline.

The minister urged all not to go for a panicked buy before Ramadan. "The commodities will be available in the market. Don't buy in large amounts from the fear of scarcity, the price hikes."

On imports from neighbouring India, he said the Indian government has been requested not to stop the export of the products we import from them. "In response, they assured us of continued supply."

Taking part in the event, Private Industry and Investment Adviser to Prime Minister Salman F Rahman said the government has taken all the necessary steps to ensure the commodities prices remain at normal levels. He suggested the authorities concerned be extra careful in determining the prices of the essential products.

The Tariff Commission representatives, at the meeting, suggested the task force take effective measures to timely adjust local market prices with global prices.

LC openings drops $12 billion in second half

Overall LC opening between July and December last year fell by around $12 billion compared to that of the previous year, as the government imposed many conditions on imports just to reduce the pressure on the country's depleting foreign exchange reserves.

Traders opened LCs worth $6.39 billion in July, $4.74 billion in October, $4.02 billion in November and $4.11 billion in December.

Treasury heads of several banks told The Business Standard that the number of LCs opened by private banks is very low because they are focusing more on collecting dollars than opening LCs this time.

"There was no option to reduce imports to keep the country's reserves sustainable by decreasing the gap in exports and imports but it has been taken down to 4 billion a month on average, which is not okay, I think," said Ahsan H Mansur, executive director of the Policy Research Institute of Bangladesh.

Imports should increase to worth 7 billion dollars, he told The Business Standard.

He further added that the amount of goods imported in the last fiscal year is not visible in the market. "The central bank needs to look into the matter."

Meanwhile, the country's reserve is set to stand at $32.6 billion after the $1.12 billion Asian Clearing Union (ACU) payment on Monday next. The central bank has been selling the greenback from the reserve to stabilise the market. It sold $7. 47 billion from reserves in the six months of the current fiscal year, as the dollar sales from the reserves in FY22 totalled a record $7.67 billion.