Dhaka, Bangladesh (BBN) – The rate of cancellation of letters of credit (LCs) for import of essential items, particularly rice, wheat and edible oils, has significantly increased because of substantial erosion in prices of the commodities in the global market.
A number of LCs for scrap vessels have also been cancelled because of drastic fall in the price of the same in the international market, officials said.
“The cancellation of LCs has increased due mainly to declining trend in the prices of commodities in the global market,” a senior official of the Bangladesh Bank (BB), the country’s central bank, told BBN in Dhaka.
He, however, expressed concern over rising trend in the cancellation of LCs of essential items saying that the rate of cancellation may go up further in the near future if the prices of such items maintained the downtrend.
The LCs for edible oil worth US$26.21 million were cancelled during the first quarter of the current fiscal. Such cancellation was worth only $2.42 million during the corresponding period of the previous fiscal, according to the central bank statistics.
The edible oil is now being traded at around $600 per tonne in the international market. The price of the item reached a record high of $1280 per tonne three months back, market operators said.
Currently, wheat is traded at $180 per tonne in the global market as against $455 per tonne in the month of July last, they added.
Most of the LCs are now being opened to import wheat from Nepal, the BB official confirmed.
The LCs for rice worth US$39.63 million were cancelled during July-September period of the fiscal 2008-09 as against the same worth $22.44 million during the same period of the previous fiscal, the BB data showed.
Rice was traded between $500 and $510 per tonne in January last. The price came down to $310 per tonne in July this year, he said.
On the other hand, the LCs for scrap vessels worth $3.06 million were cancelled during the period under review. The cancellation of LCs for scrap vessels was worth $0.09 million during the corresponding period of the pervious fiscal.
Currently, the scrap vessels are traded at $350 per tonne in the global market. The price was $750 per tonne just one month back.
“The rate of cancellation of LCs for scrap vessels has gradually increased because of falling prices of the item in the international market,” a senior official of a private commercial bank (PCB) told BBN in the capital, Dhaka.
He also said increased cancellation of LCs done on the basis of agreement between importers and exporters might create pressure on the supply situation of commodities in the local market.
BBN/SI/SSR-AD-02November08-12:12 AM (BST)