The matter will be discussed again with traders.
Bangladesh Bank officials could not arrive at a decision over the opening and settling of back-to-back letters of credit in taka at local stages at the December 28 meeting with the Bangladesh Knitwear Manufacturers and Exporters Association and the Bangladesh Textile Mills Association. Some tax and legal analyses are needed further, a bank spokesman said.
“Banks have had a dollar crisis for a long time. Hence, we have requested the central bank to allow the opening and settling of back-to-back LCs in taka at local stages. Textile millers need dollars to import yarn but our payments to them are many times the cotton prices if we pay them in dollars,” BKMEA executive president Mohammad Hatem was quoted as saying by Bangla media outlets after the meeting.
“We want to make the payments in taka so that we can continue trade even amid the scarcity of dollars. It would be beneficial for us. This will also reduce pressure on banks,” he added.
For the yarn sold through local LCs, cotton is sourced from other countries. “If local LCs are opened in taka, we will have to collect dollars separately from banks to import cotton,” said BTMA director Razeeb Haider.
“Besides, we need dollars to repay loans taken under the Export Development Fund. We will face a dollar crisis if they [apparel makers] open or settle LCs in taka. We will also incur a lot while buying dollars for our import settlement,” he added.
In a letter to the Bangladesh Bank on November 6, BKMEA had argued in favour of opening and settling local LCs in taka instead of dollars. Exporters are incurring losses in LC opening and settlement due to the Tk7-8 dollar-taka conversion gap, it had argued.
The central bank called the Wednesday meeting based on that letter.
Meanwhile, BTMA submitted a counter letter at that meeting to the central bank and showed four reasons why opening and settling LCs in taka at local stages would not be possible.
The reasons include possible dollar shortages in their import payments, problems in loan payments and complexities in money exchanges.
Fibre2Fashion News Desk (DS)