PM directs officials to open LCs for import of food, fertiliser and energy

Prime Minister Sheikh Hasina has said there is no restriction on opening letter of credits (LCs) for import of food, fertiliser and energy products from abroad to maintain their uninterrupted supplies at home.

The PM made this clear before four important bureaucrats of finance, commerce, food, banking division and Bangladesh Bank Governor Abdur Rouf Talukder in a meeting at the Prime Minister’s Office, on Sunday.

The meeting reviewed the overall financial situation of the country. 

Her clarification followed ambiguities that were caused by the government’s austerity measures amid dwindling forex reserves.

“There is no compromise for importing of those essential products in this crucial situation,” PM Hasina was quoted as saying by an official.

The Prime Minister also discussed options available before Bangladesh over securing energy and foods and maintaining stability of the prices of essentials by increasing subsidies or trimming import duties.

The respective ministries will submit their proposals to the PMO for reviewing energy and food prices and subsidy bundles. 

More discussion is needed about the subsidies, especially fertiliser subsidies which are supposed to be the same as per budget estimation and the government does not have any plan to increase the prices of fertilisers in the country, officials said.

Besides, the Bangladesh Bank was asked to take necessary measures to increase inward remittances to ease the crisis of US dollars across the commercial banks.

“We have discussed the overall economic situation of the country, in view of implementing the national budget,” senior commerce secretary Tapan Kanti Ghosh told Business Insider Bangladesh after the meeting.

He said subsidy bundles have increased in the country following global price hikes of foods and fuel oils.

Meeting sources said that the government’s austerity measures are being executed under various ministries and divisions.

Due to the dollar crisis and war in Europe, the government initially discouraged consumption of electricity and gas and restricted the opening of LCs for luxury commodities.

Bangladesh Bank informed that banks are not interested in opening of LCs (import documents), especially for importing fertiliser, food and energy products from abroad which may end up in creating a crisis of these products in the country.

PMO meeting sources said the commerce ministry has urged the National Board of Revenue (NBR) to increase duties of some 340 import products to maintain austerity.

Dollar crisis 

Bangladesh Bank governor Abdur Rouf Talukder presented a paper about an ensuing dollar crisis in the banking sector at the PMO meeting.

He said the dollar crisis would come to an ease by January next year.

Local exporters are now getting a cash incentive of 5 per cent on their shipment and are entitled to a loan from Bangladesh Bank Export Development Fund (EDF) at nearly four percent interest.

Those who import are receiving loans with a 9 percent interest that turns out to be costly for the importers. In the meeting, there was discussion about incentives on remittances and cash incentives on exports, as well.

Subsidies 

The subsidies provided by the government have increased drastically for higher electricity, gas, energy, fertiliser and even food products’ prices due to the global economic crisis.

Last year the Trading Corporation of Bangladesh received a subsidy worth Tk 1,200 crore for providing low-priced food among the marginal people. The bundle has now been enhanced to Tk 5,280 crore, up 340 per cent in one year due to substantial food price hike in the global market.

Meanwhile, the local fuel oil price has increased by 51 per cent in the last 10 months, according to IMF observation.

The subsidy outlays in the current budget were estimated at Tk 82,000 crore that would definitely exceed the set amount. 

Agriculture minister Mohammad Abdur Razzaque recently declared his ministry’s subsidy bundle at Tk 46,000 crore. In the national budget, it was estimated at Tk 17,000 crore.

More subsidies would badly be needed for fertiliser and importing Liquefied Natural Gas which has now been shelved due to abnormal price hikes in the international market. Factory owners are pressurising the government to get uninterrupted gas supplies to run their factories.

High gas prices for business entities

Importation of LNG will be resumed for providing gas to the industries as discussed in the PMO meeting. 

Energy division will submit a report to the PMO on supplying natural gas to the industries at higher prices.

The factory owners want to buy gas by paying Tk 25 per unit but the government wants more than Tk 40.   

No possibility of having export growth 

There is no possibility of an increased export growth as Europe and USA are under recession. And, major Asian markets are also affected due to the Russia-Ukraine war.

Bangladesh’s exporters believe shipment could be increased if the gas situation in the European Union countries improves during winter after importing gas from the Middle East. The situation could improve if the war gets over.