Declining stocks of raw materials amid commercial banks’ unwillingness to open letters of credit might severely hamper production and exports of textile and apparel items, sector people said.
Textiles and readymade garment manufacturers said that they were facing trouble in opening LCs which will be settled by Export Development Fund and Usance Paid At Sight LC or deferred LC in most of the banks in recent time.
They said that stock of raw materials for four to five months was needed for ensuring smooth production and exports but with the current stock the textile sector could continue its production for two to three months as banks were not opening LCs showing dollar crisis as an excuse.
The Bangladesh Textile Mills Association on Sunday sent a letter to the Bangladesh Bank seeking its direction for the commercial banks to open deferred LCs and LCs to be settled by the EDF finance.
The letter signed by BTMA president Mohammad Ali Khokon said it was alarming that most of the commercial banks had been showing reluctance in opening LCs for importing cotton, polyester staple fibre and viscose staple fibre.
If they cannot import required raw materials, it would not be possible to deliver the already received orders of apparel items.
It said that if the situation continued, production of yarns in many of the country’s spinning mills would be hampered due to shortage of raw materials.
Less production of yarns would interrupt the value chain and exports of readymade garments will be affected severely which will accelerate the existing dollar crisis, the letter said.
‘Many of the exporters have been facing difficulties in opening LCs for importing raw materials. Due to shortage of raw materials, RMG exporters have been missing export deadlines,’ Mohammad Hatem, executive president of Bangladesh Knitwear Manufacturers and Exporters Association, told New Age on Sunday.
‘Banks are unwilling to open LCs to be settled by the EDF finance as Bangladesh Bank takes more than one month to refinance the LC-opening banks ,’ he said.
Hatem urged Bangladesh Bank to keep opening of LCs smooth and to increase the limit for EDFs to import the required quantity of raw materials.
Bangladesh Garment Manufacturers and Exporters Association vice-president Md Shahidullah Azim said that many of the buyers put on hold the shipment of RMG products as exporters failed to maintain lead-time due to lack of raw materials.
‘Bangladesh Bank should ensure smooth opening of LCs in all commercial banks to keep the export earnings intact,’ he said.
‘Now, banks are cautious in opening LCs due to the challenge of foreign currency supply but good clients will not face problems,’ Selim RF Hussain, chairman of the Association of Bankers, Bangladesh, told New Age.
Possibly, banks would open LCs as the textile raw materials are not non-essential items rather these are capital expenditure, Selim, also the managing director of BRAC Bank, said.
