Home ›› 27 Jul 2022 ›› Front
The shortage of USD continues to intensify in Bangladesh despite robust initiatives introduced by the central bank to cool down the forex exchange market. The gap between the inter-bank exchange rate and actual market rate remains high despite devaluation of the local currency.
On Tuesday, most of the banks collected remittance from exchange houses at a rate of Tk 102 to Tk 103. Meanwhile, importers spent around Tk 102 to Tk 105 per USD to pay import bills, according to industry insiders.
Though 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.
Brac bank collected remittance at the rate of Tk 103 from foreign exchange houses yesterday, said Shaheen Iqbal, deputy managing director and head of Treasury department of the bank.
He said they are settling import payments at the rate of Tk 102 to Tk 105 per USD.
Pubali Bank Additional Managing Director Mohammad Ali said, “Small import payments are being settled at the bill of collection selling rate, but larger import payments are being settled at a higher rate due to the USD shortage.
“The banks that failed to analyse the forex market adequately, are now facing difficulties due to the ongoing USD shortage.”
Volatility in the forex exchange market began around August last year due to a steep rise in import payments and low inflow of remittance after the Covid-19 pandemic.
The letter of credit settlements – also known as actual import payment – rose by 46.15 per cent to $83.68 billion in FY22 when compared year-on-year.
In the just concluded fiscal year, expatriates sent $21.03 billion through official channels, compared to $24.77 billion recorded in FY21, according to the central bank data.
The forex market began heating up even more since the Russian invaded Ukraine in February this year.
Bangladesh devalued the local currency by 10.11 per cent against the USD between January 1 and July 26 this year due to the growing demand of the USD. The central bank injected a record $7.62 billion from its reserves to banks in the last fiscal year, according to the central bank data.
The forex reserve of Bangladesh fell to $39.61 billion on Monday from $46.15 billion in December due to growing import payments.
Ahsan H Mansur, executive director at the Policy Research Institute of Bangladesh, said the situation is worse now, and the central bank should have taken adequate initiative far sooner.
“Now the interest rate cap will have to be withdrawn to reduce volatility in the forex market. The Russian central bank raised their interest rate from 8 per cent to 20 per cent when the country invaded Ukraine, in a bid to decrease pressure on ruble,” he added.
The Bangladesh Bank on Tuesday asked banks to encash the term deposits of exporters’ retention quota (ERQ) balances. The order came two weeks after the central bank instructed banks to immediately encash 50 per cent of the balance held in ERQ accounts.
In a meeting with bankers on Monday, the central bank governor asked banks to realise overdue export proceeds worth $1.50 billion.
The banking regulator also eased the policy for incentive on remittance to reduce volatility in the forex market. The rules related to the 2.5 per cent incentive have been relaxed for remitters if they send money home through the official channel.
In the beginning of July, the banking regulator further tightened luxury item import restrictions, resetting the letter of credit (LC) margins at 100 per cent and 75 per cent for bringing in luxury and non-essential products respectively.
