BB keeps selling US$ to defend taka

The Bangladesh Bank continued to sell US dollars to banks to meet the growing import payments, indicating heavy pressure on the local currency caused mainly by the economic recovery from the Covid-19 pandemic.

To rein in taka devaluation, it sold $2,295 million to the country’s banks from August through December 26, according to the latest BB data.

The inter-bank exchange rate stood at Tk 85.80 per dollar on December 26, Tk 85.70 per dollar on November 01, and Tk 85.79 per dollar on November 11.

The central bank has been dealing with pressure on the taka since September this year when the economy started to reopen.

Most of the banks have been facing dollar shortages due to the increased import payments after the Covid-19 pandemic, said a high official at the central bank.

From July to October of this fiscal year, the letter of credit (LC) settlement, which is actual import payment, rose 51.33 per cent to $23.37 billion, the data showed. The declining remittance inflow in recent months was another reason behind the dollar shortage in banks, according to officials.

Bangladesh’s remittance inflow slipped 25.35 per cent year-on-year to $1.5 billion in November – the lowest in the past eighteen months, as illegal money transfers gradually returned to the pre-pandemic level.

From July to November this fiscal year, Bangladeshi expatriates remitted $8.60 billion, a nearly 21 per cent decline year-on-year.

Four state-owned commercial banks are the major clients of US dollars sold by the Bangladesh Bank, said another official at the BB.

Several mega projects are being implemented in the country now and state-run banks are financing these projects, pushing up the demand for the greenback to pay imports of machinery and equipment.

Agrani Bank Managing Director and CEO Mohammad Shams-Ul Islam said that the economy started to regain from the pandemic fallout, which was the main reason behind the dollar shortage of most of the banks.

Import payment will be increased further in the coming days when the economy and the business will also fully be recovered, he added.

The volume of imports has increased due to the reopening of the country’s economy and at the same time the cost of imports also has increased due to the rising trend of commodity prices in the international market, said former Bangladesh Bank Governor Salehuddin Ahmed.

The rates of the US dollar against the local currency are increasing day by day due to the rising import payments, he said.

The International Monetary Fund (IMF) projected that the current account deficit of Bangladesh is expected to widen in FY22 owing to the pickup in the imports of capital goods, industrial raw materials, and commodities.

The current account deficit of the country stood at $4.76 billion from July to October of this fiscal year.

The central bank had earlier purchased the dollar amounting to $205 million until July this year to keep the taka in its comfort zone. It purchased $7.93 billion US dollars from the local banks in the last fiscal year.