It is difficult to open a letter of credit! Pay attention to the risk of refund/receipt of foreign exchange

2023-02-13

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It is reported that after energy, the crisis of letter of credit issuance is seriously threatening Bangladeshi enterprises.After the government raised the prices of oil, gas and electricity, as well as the cost of imports, the country's enterprises faced higher production costs and were therefore forced to raise the prices of goods and services.The shortage of US dollars makes it difficult to issue letters of credit, adding fuel to the fire.

As rising import bills and falling remittance income from EXP lead to a shortage of dollars, and banks are unable to provide the dollars needed for imports, the Bangladeshi central bank tightens rules restricting imports of non-essential goods and luxury goods to avoid foreign exchangeSpeedilyExhaust reserves.Nowadays, it is difficult for Bangladeshi enterprises to open letters of credit, and the pressure seems to be increasing day by day.

According to data from Bangladesh Central Bank, from July to December, 2022, the number of letters of credit issued decreased by 14% year-on-year, and the number of settlements decreased by 9% year-on-year.Among them, the amount of letters of credit issued for industrial raw materials decreased by 27% to 12 billion US dollars;Letters of credit issuance for intermediate products such as clinker and limestone, a major ingredient in the cement industry, fell 33 percent to $2.58 billion.That has slowed sales and raised concerns in the country's business community that the normal business cycle will be disrupted.

The managing director of Pran Group, Bangladesh's largest agricultural product processor and exporter, said: "We have been facing difficulties in issuing letters of credit for the past two months. This is disrupting our supply chain, domestic and export-oriented markets. Production has been hampered."

Some enterprises also said that the central bank of Bangladesh has taken measures to prevent the import of non-essential goods, which is disrupting the continuity of business.If the import of industrial raw materials and machinery and equipment cannot be guaranteed, the production will be greatly affected, and the next step will be forced to lay off employees.

In addition, due to the shortage of foreign exchange, Pakistan has restricted the opening of letters of credit for importers.This has left a large number of Container, which is full of imported goods, stranded in the country's ports.(You can recall the previous report of Souhang. com: The economic crisis intensified and a large number of goods were stranded in domestic ports.)

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It is reported that although the national government has promised to release Container goods stranded in the port as soon as possible, it has decided to waive demurrage charge and port fees stranded in Container.However, Zubair Motiwara, chairman of the country's merchant group and former chairman of Karachi Chamber of Commerce and Industry, said recently that these Container have not been released, and about 5,630 Container are still stranded in the port.

Motiwala said that despite the government's assurances of maximizing demurrage charge reliefAnd detention fee, but no statement has been made so far, raising concerns among businessmen and bricks-and-mortar entrepreneurs.

Due to the delay in resolving the problem, the cost of imported goods has soared due to demurrage charge, in many cases exceeding the actual value of the contents in Container, making it impossible for importers to clear the goods.

Motiwala also said the delay in paying suppliers has given Pakistan a bad reputation because, in this case, no supplier is willing to do business with Pakistani importers.Payments to suppliers have been delayed for a long time, which is not good for enterprises or the already troubled economy.