The government of Bangladesh is considering imposing higher margins on letters of credit (L/Cs) to curb what it sees as an economically unhealthy boom in imports.

The Ministry of Commerce is reportedly considering this and other measures on the orders of Prime Minister Begum Khaleda Zia who has asked her ministries to suggest ways to narrow the country's widening trade gap.

Trade gap

Measures being considered by the authorities to discourage imports of unnecessary and luxury items include the introduction of supplementary taxes and the creation of non-tariff barriers as well as the imposition of higher margins for opening L/Cs.

Some imports however look set to escape measures. "There is nothing harmful if imports of capital machinery and raw materials increase. But the rise in importing luxury items definitely harms local industries and it should be discouraged," a commerce ministry official told Bangladesh's Daily Star.

Sugar concerns

It is unclear what measures might be applied to imports of some everyday goods that are also causing concern amongst government officials. Another commerce ministry official told the English language daily "it is clear from the statistics that the import growths for rice, sugar and edible oil are not showing a normal trend."

Indian traders are presently doing very well from sugar exports to Bangladesh but several of them are reportedly anticipating that the private sugar trade may once again be banned in Bangladesh, even though a number of lines of credit have already been opened for exports in November.

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