The Bangladesh Bank on Tuesday raised the maximum inter-bank exchange rate to Tk 110 per USD, from an earlier rate of Tk 109.5, for commercial banks to facilitate the letter of credit (LC) process.
With the move, the regulator further devalued Taka against USD 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 third time this FY the central bank devalued Taka against the USD. Last month, the central bank sold the greenback from its reserves to commercial banks for Tk 109.50 per USD.
Speaking to The Business Post, a central bank senior executive on condition of anonymity, “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 establish a unified exchange rate.”
Another senior official of Bangladesh Bank said, “The Association of Bankers, Bangladesh Ltd (ABB), and Bangladesh Foreign Exchange Dealers' Association (BAFEDA) introduced the unified rate last month.”
The rate of remittance and export proceeds is now the same at Tk 109.50. The import bill and dollar sale rate to the customers are the same at Tk 110. As per rules, interbank dollar rate will not exceed Tk 110.
Since September last year, the Bangladesh Bank devalued the local currency 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 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, which 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.
