Iftekhar Rahman
Verdant Global
Bangladesh imports much of its fuel, edible oil, wheat and industrial raw materials. Alongside international prices, it pays another, less visible charge: the cost of institutional uncertainty. Unreliable trade finance, prolonged cargo clearance and restricted market access increase costs that ultimately fall on manufacturers and households.
These problems are usually examined separately. Foreign-exchange shortages become a banking issue; port congestion a logistical problem and rising commodity prices an accusation of hoarding. Yet the economic consequences are interconnected. Uncertain payment increases suppliers’ risk premiums; delayed clearance absorbs working capital; and financing constraints reduce the number of importers able to compete. Bangladesh cannot control global commodity cycles. It can, however, prevent domestic institutional weaknesses from unnecessarily magnifying their effects.
The Hidden Premium on Trade Finance
A letter of credit (LC) is a bank undertaking, not a guarantee that the underlying goods will arrive as expected. Under the International Chamber of Commerce’s UCP 600 rules, an issuing bank must honour a complying documentary presentation. ¹ Its commercial effectiveness nevertheless depends on the issuing bank’s creditworthiness, correspondent banking relationships and settlement record.
In November 2024, Bangladesh Bank warned that overdue import payments were damaging correspondent relationships and increasing trade-credit costs.² Outstanding LC obligations reportedly exceeded US$445 million that month before declining to US$242 million by January 2025.³ Although the reduction represented progress, restoring confidence requires more than clearing accumulated arrears.
Consider the commercial arithmetic. A one-percentage-point increase in financing charges, measured against cargo value, would add US$100,000 to the cost of a US$10 million shipment without increasing the quantity delivered. This is illustrative, not an estimate of aggregate losses. Foreign banks may reduce credit lines or increase confirmation charges, while suppliers demand shorter payment terms or additional security. These expenses enter domestic prices, although no invoice identifies them as an institutional-risk premium.
The consequences extend into market competition. Large importers can sometimes distribute transactions across several banking relationships, whereas smaller businesses lack comparable flexibility. When dependable trade finance becomes scarce, market access increasingly favours financially established firms. Banking weakness consequently becomes a market-structure problem.
When Supply Chains Magnify Scarcity
Intermediaries are essential to international commerce. Traders, financiers, shipping agents and wholesalers provide legitimate services, including logistics, inventory financing and commercial risk management. The concern arises when margins reflect privileged access to foreign exchange, administrative approvals or market information rather than productive services. Nevertheless, the difference between international commodity prices and domestic retail prices does not automatically establish profiteering. Exchange rates, duties, freight, financing, storage and distribution expenses must be considered before identifying unjustified margins.
Port inefficiency compounds these costs. Chattogram Customs’ 2026 Time Release Study, reported in October, indicated average cargo clearance of approximately 11 days and 6 hours. Separate reporting recorded 13.2 days for containerised imports, compared with 11.3 days in 2022.⁴ The figures may reflect different measurement scopes, while the Chittagong Port Authority has disputed the attribution of delays. ⁵
Regardless of institutional responsibility, prolonged clearance imposes financial consequences. Importers continue financing goods that cannot generate sales proceeds. Manufacturers maintain larger precautionary inventories, diverting capital from productive investment. In concentrated markets, disrupted supply may also create opportunities for deliberate withholding. However, genuine congestion and intentional hoarding require different policy responses. Establishing manipulation demands verifiable evidence of inventory control, coordinated behaviour or unjustified supply restrictions.
From Commercial Inefficiency to Economic Vulnerability
Import-related costs extend beyond individual transactions. Higher fuel procurement costs affect transportation and industrial production. Delayed raw materials interrupt manufacturing schedules, while expensive food imports erode household purchasing power. Bangladesh’s inflation experience illustrates the vulnerability. Average inflation reached 8.68% in FY2026, with June inflation at 9.16%, according to Bangladesh Bureau of Statistics data. ⁶ The IMF’s January 2026 assessment also highlighted persistent banking-sector vulnerabilities. ⁷
Import inefficiency is not the principal explanation for inflation. Exchange-rate movements, monetary conditions and domestic supply disruptions remain important determinants. Nevertheless, structural transaction costs can reinforce price pressures and weaken the transmission of declining international commodity prices into domestic markets. This creates a double economic loss. Consumers pay more than efficient distribution would require, while businesses devote scarce capital to managing uncertainty rather than expanding productive capacity.
What Should Change
Reform should begin with institutional accountability and measurable performance. Bangladesh Bank should strengthen LC settlement supervision and publish appropriate indicators of payment reliability. Customs authorities should measure clearance times across individual stages, supported by pre-arrival processing, risk-based inspections and integrated electronic approvals.
Competition regulators should investigate demonstrable collusion and exclusionary practices rather than treating legitimate trading margins as evidence of misconduct. For essential commodities, a transparent import-parity benchmark could reconcile international prices with exchange rates, freight, duties, financing and domestic distribution costs. Such analysis would help distinguish unavoidable commercial expenses from potentially excessive margins.
Conclusion
Bangladesh’s import challenge exposes a fundamental weakness in economic governance: the cost of institutional uncertainty is embedded in commercial transactions but rarely measured as a distinct economic burden. Its consequences extend beyond consumer prices, weakening competition, absorbing productive capital and reducing resilience to external shocks.
The measure of reform is whether businesses can transact with greater certainty and whether reductions in international commodity prices translate more efficiently into domestic markets. Improving that transmission requires sustained institutional discipline rather than periodic administrative intervention. Ultimately, economic competitiveness depends not only on what Bangladesh imports, but on how efficiently its institutions enable those goods to reach the market.
References
- International Chamber of Commerce, Uniform Customs and Practice for Documentary Credits, ICC Publication No. 600 (Paris, 2007), Articles 2, 7 and 14.
- Bangladesh Bank, Foreign Exchange Policy Department, ‘Timely Settlement of Import Payments’, FE Circular No. 30 (Dhaka, 12 November 2024).
https://www.bb.org.bd/mediaroom/circulars/fepd/nov122024fepd30e.pdf
- ‘BB Again Asks Banks to Clear Overdue LC Payments’, The Daily Star (13 April 2025).
- Mizanur Rahman Yousuf, ‘Pay $48 More for a Container as Cargo Clearance Time Drags on to 11 Days’, The Business Standard (12 October 2026).
- Mohammad Suman, ‘Ctg Port Clearance Slows as Post-Declaration Delays Double’, The Daily Star (22 October 2026).
- ‘CPA Disputes NBR Study on 11-Day Cargo Clearance Time’, The Business Standard (21 October 2026).
- ‘Inflation Remains Above 9% for Third Straight Month’, The Business Standard (6 July 2026), reporting Bangladesh Bureau of Statistics data.
- International Monetary Fund, Bangladesh: 2025 Article IV Consultation, IMF Country Report No. 26/024 (Washington, DC, January 2026).
