The value of import letters of credit (L/Cs) opened in Bangladesh in the six months to December 2004 surged by nearly 25 per cent.

Some of the increased demand has come from imports of goods and machinery used by Bangladeshi firms to create goods for sales abroad, but the country has not yet reported a comparable surge in exports.

L/C boom

Import L/Cs to the value of US$7.01 billion were opened by buyers in Bangladesh in the six months from July to December last year according to figures released by the Bangladesh Bank (BB).

This represents a massive 24.7 per cent increase over the same period in 2003 when import L/Cs worth US$5.62 billion were opened.

Growth areas

According to official sources the increased value of import L/Cs is largely due to higher imports of capital machinery, intermediate goods, petroleum products and food items.

Growth in import L/Cs for capital machinery stood at 66.8 per cent for the six-month period during which the value of intermediate goods bought in via L/C increased by 59.8 per cent and petroleum products by 49.5 per cent.

Exports lagging

Even though a significant proportion of the increases in imports appear to be due to purchases of goods and machinery by manufacturing exporters, sales of goods abroad by Bangladesh have yet to show a comparable increase.

According to BB's statistics, the country's export earnings failed to reach the target during the same six month period, despite a 12.51 per cent rise in the overall volume of exports.

Trade deficit

The Export Promotion Bureau reports that export earnings for the six months to December 2004 stood at US$ 4.15 billion, around US$62.7 million short of the target set for the period.

Bangladesh's trade deficit at the end of December 2004 is provisionally recorded at US$2.86 billion.

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