The Bangladesh Bank sold $2.4 billion from its forex reserves to commercial banks in July and August – the first two months of FY24, to facilitate imports through the letter of credit (LC) process.
Though the central bank and National Board of Revenue (NBR) restricted imports last year to save USD, the move had little impact on the steady depletion of forex reserves.
In July of FY24, the regulator sold $1.15 billion to commercial banks, and the figure was $1.10 billion in August. 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.
Policy Research Institute Executive Director Ahsan H Mansur said, “The central bank’s decision to sell USD is not a relaxing move for the economy. The regulator is now in a risky position. Last month, it sold more than $1 billion to commercial banks. This is not good.
"The government is trying to stabilise the USD market before the national polls. It also took out foreign loans in a bid to raise forex reserves. The Bangladesh Bank is now trying to keep the reserves above $20 billion."
He added, “In a bid to raise the reserves, the central bank reduced the Export Development Fund (EDF). Banks should earn USD through legal channels. If they depend on the regulator, it would not be good for the country's economy.”
In FY23, the central bank sold $13.50 billion to commercial banks to help the banking sector tackle a USD crisis. Despite a steady decline in forex reserves this FY, the central bank’s 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 the kerb market.
During that time, many banks reportedly created an artificial crisis of the greenback to gain more from USD sales. The Bangladesh Bank fined 12 banks for excess dollar profits last year.
It had found that several banks charged high prices for remittances to gain dollars while the USD crisis was going on in the country.
That time, 12 banks allegedly manipulated the USD market. Initially, the central bank temporarily removed the treasury heads of these banks, but later retracted this decision completely.
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.”
