BB sets uniform exchange rate

The Bangladesh Bank (BB) has set a uniform dollar-taka exchange rate for international trade to curb currency volatility.

The inter-bank exchange rate was fixed at Tk 89 per US dollar in contrast to the existing Tk 87.90 and the LC for import or Bills for Collection (BC rate) fixed at Tk 89.15 per US dollar in contrast to the existing around Tk 88.

The new rates will come into effect from today (Monday), says a senior BB official.

The central bank on Sunday turned to uniform exchange rate following a joint proposal submitted by the Association of Bankers, Bangladesh (ABB) and the Bangladesh Foreign Exchange Dealers’ Association (BAFEDA) on the same day.

Soon after setting the exchange rate, the local currency depreciated by Tk 1.1 to Tk 89 per US dollar. This is the highest taka’s devaluation against US dollar in recent years.

The BB had depreciated taka seven times this year to mitigate the dollar shortage in the market.

“The new exchange rate will be effective from today (Monday),” BB spokesperson Md Serajul Islam told The Business Post.

However, the BB is yet to set the exchange rate for exchange houses. Islam said that the exchange houses will set the trading rate for US dollar after adjusting the inter-bank and BC selling rate.

Earlier in the day, the Association of Bankers, Bangladesh (ABB) and the Bangladesh Foreign Exchange Dealers’ Association (BAFEDA) sent a joint a proposal on the uniform rates to the BB.

In the proposal, the two bodies called for fixing the inter-bank exchange rate at Tk89.8 per US dollar instead of the existing rate at Tk 87.9.

The ABB and BAFEDA recommended that the rate for importers should be fixed at Tk 89.95 per US dollar and the rate for exporters should be Tk 88.95 and Tk 89.75 for exchange houses, according to the letter.

The BB’s move came a day after the BB met with the ABB and BAFEDA to discuss the current volatility in the foreign exchange market.

Earlier at a meeting, the ABB and BAFEDA were asked for setting a uniform exchange rate and propose it to the BB.

The meeting also decided that the exporters will have to sell their export bills to their export earning bank including discounting. The exporters would not sell their export bills to another bank, as per the meeting held on last Thursday.

When contacted, Mutual Trust Bank Managing Director Syed Mahbubur Rahman told The Business Post, “Banks will have to quote the rate fixed by the central bank now.”

Meanwhile, importers said they were spending Tk94-97 per dollar to pay import bills, terming it a huge burden.

Economists say the growing import payments amid the Russia-Ukraine war and the economic recovery from the Covid-19 pandemic created volatility in the forex market.

Letter of credit (LC) settlements rose by 49.66 per cent to $61 billion from July to March of this fiscal year, the central bank data shows. Growing import payments have put pressure on the foreign exchange market. As a result, the local currency lost its value by 3.65 per cent in the last 10 months despite the injection of dollar by the central bank.

According to the central bank, Bangladesh’s forex reserves stood at $42.32 billion on Wednesday, down from $46.15 billion on December 31 last year.