Cascading fallout from falling foreign-exchange reserves decelerates project implementation as the executing agencies and contractors are failing to open letter of credit (LC) for goods procurement, insiders say.
In many cases, they say, the commercial banks are reluctant about LC opening for the necessary imports due to dearth of the US dollar on the local money market and resultant volatility of market-driven exchange rates.
The implementing agencies are also facing difficulty in paying bills of the consultants for the dollar scarcity, which also affects project implementation under governmental development recipe, they add.
Being in a quandary, the concerned project-implementing agencies and ministries are learnt to have raised their concerns before the Cabinet Committee on Public Purchase recently.
Some civil servants involved with the project execution told the FE that their works are getting delayed due to the hurdles toward the procurement from the overseas markets following the dollar crisis.
"Many contractors inform us that they are being forced to stop procurement from foreign countries as they are facing trouble in the banking system to manage US dollar," said several PDs of government projects.
A Shipping Ministry official said some of contractors had informed that they were facing massive hurdles in opening LC for importing goods as commercial banks demur to do so.
"The banks are informing us that there is scarcity of USD in their possession. So, it is difficult for them to open the LCs," said the official.
An official at the Road Transport and Bridges Ministry said: "We have requested state-owned banks to open the LCs. But they are reluctant. They are making delays for weeks amid the USD scarcity."
Bangladesh's foreign-exchange- reserve coffers are deemed under pressure due to higher import payments and lower remittance inflows.
The country's forex reserves came down to US$36.21 billion last week from a height of $46 billion a year before in September 2021, central bank statistics showed.
Amid the falling trend in the reserves, the local currency, taka, has depreciated by more than 20 per cent over the last few months.
On September 12, Bangladesh capped the USD exchange rates for remittances and export proceeds to manage volatility on the foreign-exchange market-in the wake of a global crunch reinforced by the Ukraine war hot on the heels of pandemic corona.
The commercial banks will offer a maximum rate of Tk107.5 against a dollar for remittances and Tk 99 for the export proceeds with effect from Monday, the central bank said.
The central bank Tuesday said exchange rates of Taka against the greenback for interbank and customer transactions, set by the dealer banks based on demand-supply interaction and indicative rates suggested by Bangladesh Foreign Exchange Dealers' Association (BAFEDA), were between Tk100.06 and Tk 103.646.
The Association of Bankers, Bangladesh (ABB), a platform of managing directors of banks, and the BAFEDA, a platform of banks, set the uniform rate of the USD.
Meanwhile, the USD is transacted at Tk 107 to Tk 110 on the money market and the kerb market respectively.
A senior banker at a state-owned commercial bank told the FE that Project Directors "in most of the cases are putting pressure on us for opening LCs at the government-fixed rates. But we cannot as we have to procure USD from the floating market at higher than the officially fixed rates by the BAFEDA."
The banker said if the project offices agree to open the LCs at the market rate, they have no problem to proceed.
A Planning Commission official said the ministries and agencies in recent days are claiming that the contractors and the public agencies themselves are facing trouble in opening LCs at the commercial banks for importing goods.
Some ministries and agencies are putting pressure for extending the time and the project costs for the unusual delays amid the USD crisis on the money market, he said.
Executive Director of the South Asian Network on Economic Modeling (SANEM) Dr Selim Raihan said if the overseas procurement is affected, time and cost of the projects will be overrun.
"Usually, almost every project struggles for implementation delays due to government agencies' lack of capacity in project implementation. The fresh impact regarding the USD crisis in opening LCs will delay the execution further," he says.
Dr Raihan suggests uniform dollar rates by reducing the gap in different transactions through using monetary mechanism of the government.
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