BB: Forex market will stabilise in 2 months

Bangladesh Bank (BB) Governor Abdur Rouf Talukder has voiced hope that the volatility in the foreign exchange market will stabilise within two or three months as import costs decreased in July.

“We are trying to reduce the gap of outflow and inflow of US dollars,” he said at a meeting with journalists at BB headquarters in Dhaka on Thursday.

He said the forex market’s stability depends on the demand and supply of the American greenback and the country’s economy faced pressure in recent times because the dollar outflow was higher than the inflow.

Replying to a question, Talukder said they want to control the ongoing inflationary pressure by reducing the demand for dollars and increasing production in general without having to withdraw the lending rate cap.

As part of the move, the government and the central bank have taken a series of initiatives to reduce the demand for the US dollar and announce several refinancing schemes for the productive sectors, he added.

Meanwhile, the central bank has received around Tk 78,000 crore from the banking sector after injecting $7.50 billion to stabilise the forex market in the last fiscal year, he said.

Talking about the existing 9 per cent loan interest rate, the BB governor said that if the cap is withdrawn, the rate will increase. “If that happens, the current trend in private sector credit growth will decline and investments will take a hit.”

Regarding the current liquidity pressure on the banking sector, he said the central bank conducted a study about the money supply in the country.

“We found that our money supply is 42-43 per cent of the GDP while it’s 88 per cent in India and 120-150 per cent in Malaysia and Singapore,” he said.

“The supply of money is low in our country and this is a problem. This needs to be increased significantly. We are working on it,” said the BB governor.

During Thursday’s meeting, BB Chief Economist Dr Md Habibur Rahman also gave a presentation which showed the central bank has identified 10 banks as weak based on their defaulted loans, capital adequacy, advance to deposit ratio and provisioning.

According to the presentation, BB has already started discussions with these banks to learn more about their problems and help them improve the situation. These 10 banks will have to submit a three-year business plan to BB. A senior BB official will observe their progress. Responding to another question about good governance, Governor Talukder said, “We exercise the authority given to us by the law. I don’t think there are political pressures on us when it comes to enforcing the law.”

“It doesn’t matter who owns which bank. My only concern is seeing all the banks operating in line with the law. If the banks remain strong, the economy will be better,” he stressed.