The Bangladesh Bank has eased the import payment procedure for exporters operating outside the specialized zones if payments from buyers are deferred.
As per the circular issued by the central bank on Thursday (June 11), the exporters would be allowed to pay back-to-back letters of credit after receiving payments against export.
Exporters enjoy the back-to-back LC facility for procurement of inputs against export orders.
In the circular, the BB said, ‘The input procurements under backtoback LCs or usance LCs may be issued with realization clause on behalf of exporters operating outside specialized zones.’
Prior to issuance of the circular, the payment facility was only available for export-oriented industries operating in export processing zones, economic zones, hitech parks and other zones approved by the government.
An official of the central bank said that the BB had widened the scope of opening LCs with realization clause as many of the exporters were facing hardships due to the Corona virus outbreak.
In May this year, the country’s export earnings plunged by 61.57 per cent to $1.46 billion from $3.81 billion in the same month of last year as the Corona virus pandemic hit sales of manufacturing goods and global buyers cancelled or suspended import orders.
The BB in its circular, however, said, ‘The banks, while granting the realization clause in back-to-back LCs, will have to satisfy themselves regarding execution of the relative export orders.’
The banks will have to satisfy themselves that the suppliers have agreed to accept the relevant LCs with realization clause.
Besides, it has to be ensured that the liabilities must not be settled under ‘net-off’ arrangement with export proceeds.
Asked about the facility, Bangladesh Knitwear Manufacturers and Exporters Association vice-president Mohammad Hatem said that the facility would be a great relief for the exporters who had been facing export order cancellations due to the pandemic.
Many of the exporters were facing trouble as the banks were creating forced loans when they failed to realize the export proceeds due to order cancellations and delays in payment, he said.
‘For instance, export orders of my organisation worth $63 lakh have already been cancelled due to the Corona virus,’ Hatem said.
‘Meanwhile, I have imported inputs amounting to $42 lakh for completion of the orders under back-to-back LCs,’ he added.
He, however, mentioned that the central bank’s circular lacked clarity regarding payment against back-to-back LCs in case of order cancellation.
Hatem said that in order to help the exporters clear the payments against the back-to-back LCs, the government could allow the exporters to use the stimulus fund for payment of such liability.
Otherwise, it would become difficult for the exporters to clear such payments and to survive, he added.