BGMEA and BKMEA, the top two organizations of the ready-made garment sector, have made this demand. Exporters do not have to manage dollars separately if they get this benefit.
BGMEA and BKMEA, apex organizations of the readymade garment sector, want to open and settle local letters of credit (LC) at Taka. Exporters do not have to manage dollars separately. A meeting was held with the leaders of the two organizations at Bangladesh Bank on Wednesday. It was attended by leaders of BGMEA, BKMEA and BTMA. This information is known from BGMEA sources.
As per current rules, local back-to-back LC opening and settlement requires payment in dollars. Earlier, on November 6, BKMEA wrote to Bangladesh Bank requesting to open LCs in taka instead of dollars and to allow them to pay the price for opening back-to-back LCs at the local level.
The letter said that 80 percent of the raw materials of the knit sector are procured at the domestic level. Therefore, in order to deal with the current dollar crisis, it will be easier to deal with the crisis if the LC is opened in Bangladeshi taka instead of dollars in the case of opening LC at the local level and paying the price.
In the case of buying LC and paying the price, the traders are incurring a dollar conversion loss of 7-8 taka per dollar, the letter said, if payment is made in Bangladeshi taka instead of dollars, the traders will be freed from this loss.
BGMEA President Faruque Hassan said, “A large part of the raw materials we use to make export products is collected from the local market. For these products local back-to-back LCs are to be opened in dollars. Settlement also has to be done in dollars.”
“As it is possible to open and settle a part of these LCs in local market, we want the central bank to give us this opportunity. Basically, this issue will be discussed in the meeting.”
However, BTMA leaders disagreed on this. According to them, they have to import the raw materials of the products which they take local LC for sale to BGMEA and BKMEA member garment companies. For example, yarn sold through local LC but cotton has to be imported.
As a result, if local LCs are opened in Taka, they will have to find dollars separately from the banks to import cotton. At present they don’t need to face this problem as local LCs are paid in dollars.
President of Textile Industry Owners Association BTMA Mohammad Ali Khokon said, “We have taken a strong stand on opening back-to-back LCs. We do not accept cash against dollars as using money instead of dollars will not benefit us.”
When asked about this, BKMEA Executive President Mohammad Hatem said, “As dollars are required for opening and settlement of local LCs, the demand for dollars in the bank channel increases in addition to our losses for the conversion of these dollars.” He also said that yesterday there was a positive discussion in the meeting with the Bangladesh Bank officials.
