Bangladesh Bank (BB) has reported a very substantial increase in the value of import letters of credit (L/Cs).

The central bank says the increase is substantially down to higher prices for foodstuffs, fuels and other essential goods.

Import bill

Central bank data records import L/Cs worth US$20.6 billion were settled between July 2010 and February 2011 compared with US$14.3 billion during the same eight months a year previously.

According to BB, this is primarily because the country's import bill surged 44 per cent in the eight months to February 2011, largely due to a massive 117 per cent hike in the cost of food grains.

Inflationary pressures

The bank is now concerned that the higher cost of imports is pressuring inflation.

The government and BB have taken several measures, including the introduction of higher interest rates, to contain inflationary pressures on the economy but central bankers warn it will take time for the measures to take effect.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.