All overdue LC payments to be cleared within a month

All overdue payments relating to Letters of Credit (LCs) will be cleared within one month, said Bangladesh Bank (BB) Governor Dr Ahsan H Mansur.

"We've told the banks that since you've opened it, you will have to settle it. The banks can put blame on their clients, but as a regulator, they opened it and they must settle it. We want to reduce it to zero and we hope that we will be able to do it in a month," he told BSS in an interview at his central bank office recently.

Dr Mansur said Bangladesh has made significant progress on both financial, and labour and political fronts of trade.

"Trade has been impacted in two major ways -- financial front, and the labour and political unrest. Let me tell you that we've made significant progress on these two fronts. We had accumulated payment arrears of US$2.5 billion. Now we have been able to bring it down to over $300 million (as on December 11)," he said.

In order to assess these $300 million, he said, the central bank is talking with all the banks to figure out who are responsible for opening those letters of credit.

"In many cases, they were opened by S. Alam Group or Beximco Group or others, who are politically exposed persons," he added.

But, Dr Mansur said, the good thing is that, "Our current account deficit has improved because of a robust growth in inflow of remittances . . . The country has witnessed a more than 26 per cent rise in remittances over the past five months.""Despite the unrest, our exports are currently over 15 per cent. This is enabling us to reduce the arrears. This will help us solve the other problems with the international creditor banks, which have counter-guaranteed our exports and imports," he added.

He said, "We face serious problems in opening Letters of Credit. A lot of banks have been refusing us while many have reduced the exposure limit. So, we are negotiating to bring it back to the old limit. But the thing is that the volume of imports has increased, the LC opening has increased over the same period last year."