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Withdrawal of LC margin restriction on raw cotton & fertilizer |
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December 31, 2000
Dhaka-- (UNB)- Bangladesh Bank has withdrawn letter of credit (L/C) margin restriction from import of raw cotton and fertiliser. The central bank on December 26 decided to withdraw the LC ceiling it earlier imposed to discourage less important imports. It had slapped LC margins on imports December 11 to replete the country’s depleted foreign exchange reserves as rising imports put an alarming pressure on the balance of payment. Country’s forex reserves in December fluctuated around 1.4 billion US$ or less than two months’ import bills despite significant rise in exports. Officials attributed the low reserve to the over-invoicing during import and under-invoicing during exports. The central bank recently detected that over 600 million dollar of export money was not repatriated. As a means to reduce unusual flights of foreign currency through unnecessary imports, the central bank fixed 30 per cent LC margin from import of industrial goods and 50 percent for commercial items barring petroleum and petroleum products, capital machinery and imports under back-to-back LC. In a swift reaction, business leaders demanded immediate withdrawal of the mandatory LC restrictions, which they feared would rather encourage smuggling. Following adverse reaction from the business circles, Bangladesh Bank on December 13 relaxed the import restriction from industrial raw materials, but stuck to its decision on commercial imports. |