DHAKA, Dec 3: Bangladesh Bank, the central bank of Bangladesh, has recently withdrawn the mandatory margin requirements on the opening of letters of credit (LCs) for imports to meet a pre-condition of the International Monetary Fund (IMF) for securing a fresh loan package, report a section of the Dhaka based national dailies on Wednesday.

In its latest circular, issued on Tuesday, Bangladesh Bank stipulated that commercial banks can settle LCs through bank-client relationships rather than by having to keep any obligatory margins.

Earlier, in October this year, the government reduced by half the margin requirement on opening of LCs for importing 56 commodities, mostly luxury items that included perfume, soap, toothpaste, imitation jewellery, chocolate, refrigerator, biscuit, dry fruits, ceramic table wares etc.

The IMF earlier put a condition to gradually withdraw the margin requirements on opening of LCs for importing 55 consumable items by November 2003 while approving a $490 million fund for Bangladesh under a three-year Poverty Reduction and Growth Facility.

The country’s foreign exchange reserves stood at more than $2,400 million at the end of November.

Economists, however, termed the latest move of withdrawing LC margin as a mechanism of “supply augmentation” to reduce inflationary pressure on the economy.

“The measure will facilitate imports of the different products which ultimately helps continuous supply of raw materials for production activities,” the daily New Age said, quoting

Dr. Zaid Bakht, a research director of the Bangladesh Institute of Development Studies (BIDS).