Against the backdrop of dollar crisis, the Bangladesh Knitwear Manufacturers and Exporters Association recently have locked horns over the mode of the opening of letters of credit payments. The former wants it in Bangladesh Taka while the letter desires it to be in dollars.
The BKMEA in a letter to the Bangladesh Bank Governor Abdur Rouf Taulekgdar has proposed that LC may be allowed to be open and settle the LC in Taka as 80 percent of the knitwear industry source raw materials locally. The BKMEA letter asserted that there is a global shortage of dollars and Bangladesh is no exception.
The letter further disclosed banks are finding it hard to meet the dollar demand for LC opening and settlement. The association suggested that to mitigate the situation the settlement and opening of LC at the local stage be allowed in Taka. The conversion gap between the dollar and local currency is Rs.7-8 which makes locally purchased imports expensive.
The BTMA in response urged the Bangladesh Bank governor to continue with the present arrangement as the suggestion by BKMEA would create complexities. The BTMA president opposed the idea of allowing the opening of back-to-back LCs on raw materials that are available locally in the name of resolving the dollar crisis by saving dollars.
The BTMA that imports its basic raw material cotton from abroad has to make the payments of export development fund and UPAS loans in dollars. But if the goods are delivered against back-to-back LC in taka (on yarn or fabric supplied by BTMA members) the BTMA would be short of dollars to fulfill its commitments.
