The apparel manufacturers and exporters of the country have wanted flexibility from the central bank in clearing raw material import payments, because the buyers are delaying bills, deferring shipments, and halting production of existing work orders, Bangladeshi media reported.
A delegation of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) on Monday met with central bank Governor Abdur Rauf, and sought policy support for avoiding forced loans created through non-payment of letters of credit (LCs).
According to the media report, the Bangladesh Bank had warned commercial banks of revoking their authorized dealer (AD) licenses for forex trade if they fail to pay their import bills in time on last Wednesday.
The apparel manufacturers’ inability to clear LCs within deadline is making things difficult for the AD banks.
Under the circumstances, many commercial banks are putting pressure on apparel makers so that they clear LCs as soon as possible, otherwise they will have to deal with forced loans, said industry insiders.
According to the BGMEA, the central bank decision came at a time when buyers were already deferring shipments and delaying export payments. Though such issues prevent exporters from clearing back-to-back LCs on time, they usually negotiate with their raw material suppliers.
BGMEA President Faruque Hassan, who had led the delegation, told the media that they are navigating through a critical situation, but the central bank has withdrawn its support. How will they clear LCs if we do not receive export payments on time?
“Our banks are already putting pressure on us to clear import bills, but where is the money? Our buyers have not paid export bills of millions of USD. Export items worth nearly $1 billion are still in our warehouses,” he added.
Commenting on the issue, Savartex Group’s Managing Director Faisal Samad told the media; “Around 1,000 factories are suffering from shipment deferments and rescheduling of shipping dates.
“If each factory has an average of $1.5 million worth of clothes in stock, the total would reach $1.5 billion. However, I think the actual figure is even higher than the estimate.”