Summary

The Bangladesh Bank has made things easy for industrial imports by letting importers use a letter of agreement instead of a traditional letter of credit (LC). This directive intends to facilitate imports into designated economic zones, such as Export Processing Zones and Economic Zones. From the time being importers are allowed to secure short-term foreign loans to mitigate their import obligations. Foreign lenders can issue LCs, standby letters of credit, or supplier guarantees.  The circular also gives general authority for corporate, personal, or third-party guarantees to help with short-term import financing.

Context

The Bangladesh Bank, which is the central bank of Bangladesh has recently introduced a fresh measure for raising trade flexibility. It simplifies the process of industrial establishment by allowing importers to use a letter of agreement instead of a traditional letter of credit (LC). The Foreign Exchange and Policy Department of the Bangladesh Bank has already issued a circular in this regard.

This directive primarily intends to facilitate imports into designated economic zones, such as Export Processing Zones and Economic Zones. The directives also include provisions for short-term import credit, which ensures that enterprises can access foreign items through normal arrangements.

The importers can now obtain short-term foreign loans to mitigate import obligations and the foreign lenders are also permitted to issue LCs, SBLCs, or guarantees to suppliers, with repayment terms agreed upon.

The central bank has also approved corporate, personal, or third-party guarantees for short-term import credit, providing importers with greater financial flexibility.

The circular outlines a new agreement for industrial imports to receive a short-term foreign credit facility with a specific repayment period which shall not exceed 60 days.

According to a Central Bank official statement, there is some confusion about imports without LCs, despite Import Policy Order support. He added that this circular aims to provide detailed guidance to promote contracts and reduce bank exposure.

Picture and Article Source: The Daily Star