The Bangladesh Bank sold $1.41 billion from forex reserves to state-owned and commercial banks between July 1 and August 7 this FY, to facilitate imports through the Letter of Credit (LC) process.
When compared year-on-year to FY23, the regulator pumped $1.50 billion into commercial banks, central bank sources told The Business Post on Tuesday.
Currently, the Bangladesh Bank is selling the greenback to banks at Tk 109.50 per USD. The country’s banking sector has been facing issues due to the volatility in the USD market, with many importers claiming they have been unable to get USD for opening LCs.
In FY23, the central bank sold $13.50 billion to commercial banks in a bid to help the banking sector tackle a USD crisis. Despite a steady decline in forex reserves this FY, the central banks USD selling spree continues.
The money market has been facing a USD crisis for more than one and half years. Last year, the USD rate rose to Tk 122 in this market. During that time, many banks reportedly created an artificial crisis of the greenback.
Since last September, the Association of Bankers Bangladesh (ABB) and Bangladesh Foreign Exchange Dealers Association (BAFEDA) have been fixing the USD rate.
On condition of anonymity, the treasury department chief of a bank said, “We are getting USD from the central bank, and this covers 30 per cent to 40 per cent of our demand. Due to the USD crisis, importers are facing issues with opening LCs.”
Policy Research Institute Executive Director Ahsan H Mansur said, “The central bank’s move of selling USD is not relaxing for the economy. The regulator is now at a risky position. Last month, the central bank sold more than $1 billion to commercial banks. This is not right.
“The government is trying to stabilise the USD market before the national polls. The government also took foreign loans in a bid to raise reserves. The Bangladesh Bank is now trying to keep the reserves above $20 billion.”
In July last year, the Bangladesh Bank imposed a 100 per cent LC margin on imports of luxury and non-essential items. The same month, the regulator also asked banks to inform it 24 hours before opening of LCs amounting to $3 million or above as part of austerity measures.
The country’s forex reserves continue to fall since August 2021 because of the Bangladesh Bank’s USD selling spree. The figure was $48 billion in August 2021, highest in Bangladesh’s history.
It then declined to $39 billion in the same month of 2022, and $29.63 billion till August 2 of 2023. It should be noted that when the reserves are calculated under the IMF formula, the figure will be at $23.3 billion till August 2 this year.