Bangladesh Bank steps in to arrest onion price spiral

Bangladesh Bank has ordered banks to cap the margin of LC (letter of credit) to import onions at the lowest level in an effort to cool down spiralling prices of the kitchen staple in the market.

In a notice issued on Thursday, the central bank noted a surge in onion prices in the international market and directed banks to keep the LC margin rate at a minimum level to keep onion supplies and prices stable.

The order will remain effective until Dec 31, it added.

Earlier on Mar 2, the central bank had similarly instructed banking institutions to fix the LC margin on onions and other essential commodities at a minimum level until May 30.

But the onion market in Bangladesh has been jolted in recent days by India's decision to once again ban exports of the kitchen ingredient this week.

This time, onion prices have nearly doubled in a day in Bangladesh following the latest curbs.

To facilitate the sale, the government will import 100,000 tonnes of onion through its trading arm, Commerce Minister Tipu Munshi said.

He also said the government had learnt its lessons from last year’s crisis when India had banned exports in a similar move to control its domestic market.

The retailers in the capital were asking between Tk 85 and Tk 100 for 1 kg of the kitchen staple on Tuesday, up from Tk 60 a day ago.

Consumers rushed to the markets to buy onion fearing further price hike. The prices had skyrocketed up to Tk 300 a kg last year.

Munshi urged people to avoid panic-buying, which he said was one of the reasons behind the sudden price spike.

Bangladesh will need 1 million tonnes of onion until January while it has 550,000 tonnes in stocks, according to the minister.