Bangladesh has reported a surge in the value of letters of credit (L/Cs) settled for imports.

However, there are concerns that the pressure of demand for more import L/Cs is triggering a liquidity crunch.

L/C figures

The value of L/Cs settled in the last six months of 2010 was US$15 billion compared with just US$10.7 billion during the second half of 2009.

According to official sources, the value of outstanding L/Cs is even bigger.

Liquidity crunch

Such demands for funds for essential imports is causing problems for Bangladeshi banks that are struggling to satisfy the increased demand for import funding.

Bangladesh's import bill is soaring, partly due to sharply rising prices for essential commodities such as food and fuel, and also because of some very large purchases of power plant equipment.

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