A three-day bank closure, a five-day internet blackout, and the turmoil surrounding the quota reform campaign have all contributed to a fall in remittance inflows and import LC openings over the last week.
Remittances from 19th-24th July only came to US $ 78 million, which is the amount expats usually send in a single day through banking channels, according to the Bangladesh Bank. This means that remittances for the first 24 days of this month only amounted to US $ 1.5 billion.
After the dollar’s previous increase, remittances hit US $ 2.25 billion in May and US $ 2.54 billion in June, the second and third-highest monthly totals, respectively.
According to bankers, since banks reopened, the remittance pace has not much risen. Even though remittances regularly decline in the months following Eid, the present flow is abnormally low. Remittances for July are probably going to stay below US $ 2 billion, with a growing tendency of foreigners using hundi.
Mentioning that the exchange houses are receiving fewer remittance dollars, a deputy managing director at a private bank told the local media, “To collect remittances, we pre-fund the exchange houses by ordering remittances in advance. In the last few days after the reopening of banks, several exchange houses have informed us that not many customers are coming to their counters to send remittances. As a result, they are not receiving remittances as usual.”
In light of this, the remittance dollar rate rose to Taka 118.70–118.80, an increase of 10–20 basis points. He said that the tariff had been up to Taka 118.60 for a minimum of one month.
The supply of dollars and the demand for importers to open Letters of Credit have decreased due to declining remittance inflows.
Big companies are holding off on making new investments, according to senior bank officials, as they want to study the political climate of the nation. Specifically, import licenses for capital machinery have not been authorised in a long time, and the RMG industry’s need for raw material imports has declined as a result of a decline in export orders.
Consequently, many big importers are not opening new LCs, which may result in a lower LC opening figure at the end of the month, they added.
According to central bank data, the country’s state-owned and private banks opened import LCs worth US $ 5.17 billion in June, down from US $ 6.83 billion in May. In FY24, a total of US $ 68.19 billion worth of import LCs were opened, which is a 1.85 per cent increase compared to US $ 66.95 billion in FY23.
A policymaking official at a private bank said, “Usually, we open US $ 7-8 million in LCs per working day. However, in the last two days of last week after the holidays, we averaged only US $ 1-1.5 million in LCs. On Sunday, we opened about US $ 5 million in LCs.”
This seasoned banker said, “We have been getting small importers opening LCs for the past few days, mainly for products like consumer items, finished metals, hardware, and baby foods. However, there is not much demand for LC openings from big importers.”