Letter of credit (L/C) usage is on the increase in Bangladesh on the back of private sector credit growth of 11.1 per cent to US$2.44 billion during July-December last year.

The figures mean that overall private sector credit is 8.72 per cent higher at US$1.66 billion than it was in the corresponding period in 2006.

Import growth

Credit flows to the private sector increased in the second half of last year largely due to a rise in import financing, according to a senior Bangladesh Bank (BB) official.

One result of this was that import L/Cs worth US$9.078 billion were settled between July-December 2007.

L/C growth

This compared with US$7.742 billion of import L/Cs settled in the previous year, according to BB data.

Banks have also been instructed by BB to make L/Cs more available as the country seeks to recover from losses caused by last year's disastrous floods and cyclone Sidr.

Trend set

The BB official says the upward trend of private sector credit is likely to continue in the near future, boosted by the central bank's new monetary policy.

On 10 January BB announced a change in monetary policy aimed at achieving higher economic growth through the expansion of credit to the private sector.

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