STAR BUSINESS REPORT

The central bank has asked banks to take a minimum cash advance from importers while opening letters of credit (LCs) for essential commodities as it looks to keep their prices at a tolerable level during Ramadan and ensure smooth supply.

The advance payment, also known as the cash LC margin, should be kept at the minimum level depending on the bank-client relationship, said the Bangladesh Bank in a notice yesterday.

The directive comes a week after the commerce ministry suggested the central bank form a crisis management cell to facilitate the opening of LCs for essential commodities imported in the run-up to Ramadan when the demand for a number of basic items surges.

Importers of eight items – edible oil, gram, lentil, onion, sugar, peas, spices and dates – will be extended the import facility with a minimum LC margin.

The demand for essential products usually goes up during the fasting month, driving up their prices on most occasions.

The prices of edible oil and sugar have already surged in Bangladesh because of the higher import costs of the raw materials needed to produce them, the escalated transport and fuel costs, and the energy shortage, driven mostly by the Russia-Ukraine war.

Businesses, including commodity importers and processors, have complained that they can’t open LCs to buy essential commodities from the external market since banks are largely reluctant to facilitate their purchase amid the US dollar shortage.

Bangladesh will require nearly $2.5 billion worth of grams, dates, lentils, crude edible oil, sugar and wheat in the four months to March, when the fasting month is scheduled to begin, according to a paper of the commerce ministry recently.

Three items -- crude soybean oil and seed, refined, bleached, and deodorised palm oil, raw sugar and wheat -- will require $2.1 billion out of the total projected cost.