Banks will now have to pay Tk 110.50 per USD to the Bangladesh Bank to facilitate the letters of credit (LC) process, applicable only to government imports of essential goods such as fuel. The central bank raised this rate by Tk 0.50 on Monday.
With the move, the regulator further devalued Taka against USD in a bid to narrow the rate gap between the reserves and market, in tune with the International Monetary Fund (IMF) recommendation to implement a unified exchange rate, Bangladesh Bank sources say.
This is the fourth time this FY the regulator devalued Taka against the USD. Between September 1 and 24, the central bank had sold USD from its reserves to commercial banks for Tk 110.
It should be noted that at a meeting on Sunday, the Association of Bankers, Bangladesh Ltd (ABB), and Bangladesh Foreign Exchange Dealers' Association (BAFEDA) raised the USD rate by Tk 0.50 for remittance and exports – pushing it to Tk 110.50 per USD.
Speaking to The Business Post, a central bank senior executive on condition of anonymity said, “The Bangladesh Bank is devaluing the local currency at a faster rate due to two key reasons.
“Firstly, it aims to reduce the pressure on USD currently in the reserves, and secondly, it aims to maintain a unified exchange rate.”
The rate of remittance and export proceeds is now the same at Tk 110.50. The import bill and USD sale rate to the customers are the same at Tk 110.50. As per the rules, interbank USD rate will not exceed Tk 110.50.
The interbank USD rate stood at Tk 110 on Monday.
Since September last year, the Bangladesh Bank devalued Taka against the USD by 14.50 per cent. The central bank had sold USD to commercial banks at TK 96 during that period.
The central bank sells the USD to state-owned banks to facilitate the LC opening process for essential product imports. Some private banks get USD from the central bank to facilitate imports of key commodities such as fuel oil.
A treasury head of a private bank, on condition of anonymity, said, “We get USD from the central bank at 30 per cent – 40 per cent as our requirement. The banking sector has been facing a shortage of USD, and it is crucial for facilitating the LC process.”
At present, BAFEDA sets the export, import, and remittance rates as per instructions from the Bangladesh Bank. The rates set by BAFEDA have been unable to stablise the market, as many banks are not following the fixed rates.
