Bangladesh witnessed its lowest volume of import letters of credit (LCs) opened in nearly five years this past June, according to data released by the central bank. The development, triggered by weak private investment, persistent inflation, and stagnant wage growth, is raising alarm among economists and bankers about the country's import capacity and overall economic health.
The Bangladesh Bank reports that only $4.14 billion worth of LCs were opened in June 2025-a staggering 24.42% drop compared to the same month last fiscal year, when $5.47 billion worth of LCs were opened. This is the lowest monthly LC figure since August 2020, during the height of the Covid-19 crisis, when the country’s imports fell sharply due to a nationwide lockdown.Experts say this steep decline in import financing is more troubling now than during the pandemic. The economy was largely frozen in 2020 because of an external shock.
or of the Policy Research Institute. “But this time, the decline is internally driven-by a combination of macroeconomic mismanagement, falling domestic demand, and policy inertia.”
Downward Spiral since Mid-Fiscal Year: The trend of falling import LCs has been evident throughout the second half of the 2024–25 fiscal year. Bangladesh Bank data reveals a steady decline month over month, culminating in the June low. This suggests deep-rooted challenges in the real economy that are unlikely to resolve without substantial policy interventions.
“This isn't just a temporary fluctuation,” noted Syed Mahbubur Rahman, Managing Director and CEO of Mutual Trust Bank. “Many importers have significantly reduced their orders, citing weak consumer demand. On top of that, the implementation of public sector investment projects has slowed,  further hurting capital goods imports.” He also pointed out that such a sharp fall in imports, especially in a country as reliant on imported inputs and consumer goods, will have serious ramifications. “The ripple effect will be visible in reduced government revenue, weakened banking income, and a broader slowdown in trade-related activity.”
Private Investment Remains Subdued: A primary reason behind the plunge in LC opening is the slump in private sector investment. Bankers and industry insiders cite rising loan interest rates, limited access to working capital, and growing political and economic uncertainty as reasons why businesses are putting expansion plans on hold.
“The mood in the business community is cautious, if not outright pessimistic,” said Faruq Mainuddin, a senior official at a leading commercial bank. “Even exporters are struggling to open back-to-back LCs due to dollar shortage and low demand from abroad.”
Imports of capital machinery, often seen as a forward-looking indicator of investment appetite, fell more than 25% compared to the previous fiscal year. Similarly, imports of industrial raw materials and intermediate goods have dropped significantly — painting a grim picture for manufacturing and export production in the coming months.
Stagnation in Consumption Worsens the Problem: Rising inflation and stagnant wage growth are contributing to declining consumer demand, which in turn is leading to lower imports of finished goods. “Real income has eroded due to persistent inflation over the last two years,” explained Dr Selim Raihan, Professor of Economics at Dhaka University. “As a result, households are prioritizing necessities and cutting back on discretionary spending.”
This has led to an across-the-board decline in imports — from consumer electronics to processed food and textiles — many of which rely heavily on imported components or raw materials. Retailers and wholesalers, sensing low turnover, are reducing their orders and operating on minimum inventory levels.
LC Settlements Fall Too, Despite Full-Year Growth: Not only have LC openings plummeted, but LC settlements — which reflect payments made on previously opened import orders — have also dropped sharply. In June 2025, LC settlements stood at $4.59 billion, down 14% from $5.33 billion in the same month the previous year. This is the lowest settlement figure since November 2020, when the country was still reeling from Covid-19 disruptions.
However, on a full-year basis, LC settlements for FY 2024–25 totaled $69.46 billion — a 4.18% increase from the previous fiscal year’s $66.07 billion. The higher annual figure masks the recent downward trend and highlights that the slowdown has intensified in recent months.
Low Import Levels Distorting the Currency Market: One immediate effect of the import decline has been an unexpected increase in the supply of dollars in the banking system, which has led to a weakening of the greenback in the local market. Data from both Bangladesh Bank and commercial banks show that the dollar's price fell from Tk 123 to around Tk 120 in the second week of July.
To stabilize the exchange rate, Bangladesh Bank intervened by buying dollars from commercial banks through a newly introduced auction mechanism — the first such move in the country’s history.
On July 13, the central bank bought $173 million at Tk 121.50 per dollar. Two days later, it bought another $373 million. A smaller $10 million purchase followed shortly after. These interventions signal the central bank’s desire to prevent a rapid appreciation of the taka, which could hurt export competitiveness and remittance inflows.
Falling LC Openings a Sign of Structural Weakness: Economists warn that the steep fall in LC activity cannot be dismissed as a seasonal or short-term anomaly. Instead, it reflects deeper structural weaknesses — ranging from a lack of investor confidence to poor fiscal coordination.
“This is a warning sign,” said Dr Zahid Hussain, former lead economist at the World Bank’s Dhaka office. “If capital goods and industrial inputs are not being imported, it indicates that productive activity is slowing down. That will affect growth, employment, and revenue collection in the months ahead.”
He added that the government must address this by creating a conducive business environment, ensuring access to finance, and prioritizing transparency in fiscal management.
Policy Recommendations and the Way Forward: To reverse this trend, economists and business leaders are calling for an urgent policy response. Some recommended measures include: Lowering borrowing costs for businesses through targeted liquidity support and monetary easing. Removing import restrictions on essential raw materials and intermediate goods. Boosting public investment by speeding up ADP project implementation. Holding dialogues with business associations to identify and remove trade bottlenecks. Restoring confidence by ensuring a predictable policy environment, especially ahead of the next national election. 
“The government cannot afford to be complacent,” Syed Mahbubur Rahman stressed. “We need proactive measures to restore import momentum — otherwise, the slowdown will seep into every sector of the economy.”
An Alarming Economic Indicator: The record-low LC openings in June are more than just a trade statistic — they are a barometer of an economy in distress. With private investment stalled, inflation unchecked, and consumption shrinking, Bangladesh faces a critical juncture. Unless swift corrective action is taken, the current slowdown in imports could lead to a broader economic stagnation, undermining both growth and stability in the months ahead.