The Bangladesh Bank has tightened the country’s imports further as the importers will have to maintain up to 100 per cent margin against the import of luxurious and nonessential items, including Sedan car, sport utility vehicle and multi-purpose vehicle.

The central bank has also brought several other items under its high import letter of credit margin net, showed a BB circular issued on Monday.

Under the new circular, gold and gold-ornaments, precious metal, pearl, readymade garments, leather goods, jute goods, cosmetics, furniture and decoration items, fruits and flowers, non-cereal food, processed food and drinks, alcoholic drinks and tobacco or alternatives of these items and other luxurious products imports will be subject to 100 per cent cash LC margin.

Previously, the obligation was on cars and electric and electronics home appliances.

There would be no mandatory LC margin limit on imports of baby food, essential food items, fuel, health directorate-approved live saving drugs and other kits, raw materials and capital machinery directly imported for the production-oriented local industries and export-oriented industries, agricultural equipment and essential products of the government’s priority projects.

Banks would determine the applicable LC margin for the products based on its relationship with their customers.

Apart from the luxurious and essential items, the central bank asked banks to set LC margin at maximum 75 per cent in cash for imports of non-essential items.

The BB also asked banks to consider only the importers’ own fund as LC margin and not to treat any fund issued as loans as margin or not to create any fresh loans to fulfil the LC margin obligation.

The central bank found no alternative for now other than slapping high LC margin on imports of luxurious and non-essential items due to soaring imports in the first 11 months of the just concluded financial year 2021-2022.

In July-May of FY22, the country’s import payments rose by 39.03 per cent to $21.17 billion.

The total import payments in the period under consideration rose to $75.4 billion from $54.23 billion in the corresponding period of FY21.

Though the export earnings posted a 34-per cent growth with the earnings exceeding $52 billion in FY22, the earnings growth was not adequate to offset the trade deficit.

So, the country’s trade deficit rose to record $30.82 billion in the first 11 months of FY22, resulting in a depletion of the country’s foreign exchange reserve by over $6 billion to bring down the reserve to $41.8 billion at the end of June 30 from $48.06 billion in August of FY22.

To contain the reserve depletion, the central bank slapped high LC margin on import of luxurious and non-essential items on April 11.

Initially, the LC margin was set at maximum 25 per cent against imports of luxurious and non-essential items.

Since the situation remained almost same even after the increase in LC margin, the BB again in May asked banks to impose LC margin on imports of luxurious items — car, electronic and electric home appliances — at least 75 per cent.

For the non-essential item imports, the minimum LC margin was imposed at 50 per cent.

The immediate past BB governor Fazle Kabir in his written speech on the monetary policy statement for FY22 also mentioned the fresh measures to tackle the trade imbalance.

Besides the central bank measures, the government also increased duties on imports of several items, including furniture, fruits, flowers and cosmetics, to contain the soring import of the country.