Home ›› 28 Jul 2022 ›› Editorial
Since the Ukraine War began, the world has undergone a spate of upheavals, which continue to magnify. Starting from abrupt and abnormal price hike of essentials to noticeable disruptions to global supply chains, commerce across the globe has been facing hurdles. At the same time, the rate of dollar has seen a sudden surge along with a soaring demand as the central bank’s reserve, which was above forty billion for quite some time, went down.
As per a TBP report, the forex reserve of Bangladesh fell to $39.61 billion on Monday from $46.15 billion in December due to growing import payments.
The fall of dollar reserves possibly sent alarm signals because our South Asian neighbour, Sri Lanka, is also on the edge of a precipice due to drastic fall of dollar reserves against the backdrop of prolonged socio political convulsions.
The war in Europe is believed to have had an adverse impact on the booming tourism industry of Sri Lanka, which is the major foreign exchange earner for the island nation. The conflict involves major superpowers of the world and a stark polarisation among top nations has had a direct impact on commerce, resulting in ripples being felt by emerging economies.
The current dollar crisis plus a rush among people to buy the currency is but a fall out of the war because a cycle of unfavourable developments include price hike of fuel, essentials plus a demand for a currency which can be used anywhere in the world, especially in times of crisis. Although the inter-bank exchange rate currently stands at Tk. 94.70 per USD, this rate rose to a record Tk. 112 per USD in the kerb market on Tuesday. On the same day, the Bangladesh Bank sold $50 million to banks.
Despite the inexplicable rise of the rate of exchange in the open market, most TV channels reported that there has been a spree in the buying the US dollar. Economists analysing the trend have come up with several observations: firstly, they feel that in the coming days, the rate of exchange will go even higher and, therefore, Dollar buying and selling would prove to be a lucrative business.
Secondly, at a time of economic ferment, dollar may prove to have more saleable quality than gold. The prospect of making a hefty profit is allegedly encouraging people to hoard the currency, an activity brazenly carried out outside the purview of the legal frame work.
Some economists have also cautioned about whitening of illegally accumulated money through the ongoing dollar buying rush. They contend that since many foreign currency exchange centres employ agents to buy and sell, circumventing official records, money accumulated unlawfully and stashed in homes may be converted to dollar to be encashed at a later time, with demands rocketing.
Obviously, when demand for dollar rise for legal foreign travel, overseas medical treatment plus education costs abroad, people will brush aside scruples and buy the currency irrespective of its murky genesis.
There are also fears that ‘over invoicing’ is a cause behind the dollar crisis.
From a practical perspective, eradicating a plethora of shady dealings involving the dollar may be impossible; however, the spiralling exchange rate can be controlled with strict monitoring of the money exchange centres along with measures to prevent panic buying.
A large number of general people have gone on a dollar buying spree simply because they are anticipating a financial crisis similar to that of Sri Lanka. The growing apprehension can be checked once there is a total ban on the import of nonessential items. The central bank’s vigilance in detecting over invoicing is now crucial.
