BB sells $121m to banks in 10 days of February

The Bangladesh Bank has sold $121 million to banks in the first 10 days of this month due mainly to the growing demand for import payments.

It did this despite the local currency’s devaluation, which was Tk 1.2 against the American greenback in the last six months.

The inter-bank exchange rate stood at Tk 86 per dollar on Saturday, up from Tk84.8 in July last year, the central bank data said.

The Bangladesh Bank sold a record $3.15 billion between July and January of the current fiscal year, up from $235 million in the entire 2020-21 financial year.

The country’s import spending stood at $38.39 billion in the July-December period of the current fiscal year, up from $25.22 billion in the same period of the previous financial year.

A central bank official said import payments would increase in the coming days as the industrial expansion was growing after the Covid-19 shock.

The slow trend of remittance earnings and price hikes in the global commodity market are also the reasons behind the central bank’s dollar selling spree.

The economy and businesses had already overcome the Covid-19 shock, causing import payments to increase, Agrani Bank Managing Director and CEO Mohammad Shams-Ul Islam told The Business Post.

Remittance earnings stood at $1.7 billion in January this year, down from $1.96 billion in the same month last year.

Policy Research Institute Executive Director Ahsan H Mansur said import payments had risen sharply in the last several months, which was good. “But fund management for import payments has become very difficult.”

The rising import payments might bring down the country’s reserve to below $40 billion at the end of the current fiscal year, he said.

The foreign exchange reserve stood at $45 billion on February 9 this year, down from $46 billion in December last year, central bank data shows.

Mansur said the government should reduce imports.

The increasing trend of commodity prices in the global market was another reason behind the sharp rise in import payments, said Zahid Hussain, former lead economist of the World Bank’s Dhaka office.

The Bangladesh Bank began selling the American greenback in August last year as the local currency was, and still is, experiencing a depreciating trend after more than a year following a decline in remittance and an increase in imports.