The Bangladesh Bank has sold $11.65 billion from the country's forex reserves to state-owned, and in specific cases, to private commercial banks in the first ten months (July-April) of FY24 to facilitate the government’s commodity and fuel imports through letters of credit (LCs).
Bangladesh Bank sources confirmed the figure, and mentioned that the USD selling period was July 1 to April 22 of FY24.
The central bank sold the USD at a rate of Tk110 to the commercial banks to facilitate the opening of government LCs. However, the country’s commercial banks are offering Tk 116-117 per USD to the remitters, and opening the private LCs at Tk 118/USD.
Insiders think that commercial banks are offering to their remitters of Tk 117-118, so they can't open the LCs by own USD earning, because they already have a gap of Tk 6 to Tk 7. No bank wants to lose their funds.
To facilitate the government's LCs, the central bank is selling around $60 million – $70 million in a working day.
Arfan Ali, former managing director of Bank Asia told The Business Post, “It is true that selling USDs from reserves is cooling down the USD market. But on the other hand, the amount of local currency against the USD is going to the central bank.
“As a result, the banking sector is suffering from a liquidity crisis as well.”
The senior banker pointed out that the central bank had planned to reduce the money flow in the market to curb the ongoing high inflation.
Executive Director of the Policy Research Institute of Bangladesh (PRI) Ahsan H Mansur said, “We economists and the International Monetary Funds (IMF) want the exchange rate to be unified.
“Otherwise, the central bank cannot control the forex market. No banks want to sell the USD at a lower price. So the central bank has been supporting the banks with USDs for opening LCs.”
A businessman, on condition of anonymity, said, “We are still facing the problems in opening LCs in banks. Commercial banks do not want to open LCs at official rates. The rate is currently Tk 118, which is a burden for us, as we do receive the export earnings below Tk 110. This is not fair.”
The treasury department chief of a private bank, preferring to be anonymous, said, “We received USD from the central bank, covering 30 per cent to 40 per cent of our demand, as importers struggle with opening LCs due to the USD crunch.”
According to the central bank data, currently the forex reserve stood at $19.89 billion, as per International Monetary Fund's (IMF) method. The gross reserves stood at $48 billion in 2021. But after the Covid pandemic eased, the reserves have been on the decline.
