Home ›› 19 Aug 2022 ›› Front
The country’s banks are making a fortune by taking advantage of the USD crisis triggered by an increase in import payments, a situation that has forced importers to buy the greenback at higher prices to keep the wheels of the economy turning.
The USD shortage, coupled with the banks’ tendency to make as much money as possible by exploiting the crisis, have caused import costs to spiral out of control. This in turn has intensified the inflationary pressure on consumers already grappling with financial headwinds.
During the January-June of 2022, banks made significantly more money from selling USD compared to the same period last year, with exchange gains hitting up to 700 per cent, show an analysis of the banks’ financial reports from the first half of this year, and central bank sources.
Bank Asia recorded the highest profit growth during this period when compared year-on-year. The bank’s gains from USD exchange rose 770 per cent to Tk 200 crore during the January-June period of this year.
Prime Bank is at the second position with 504 per cent growth in exchange gains. The bank’s earnings reached Tk 151 crore in the same period this year, a significant rise from Tk 25 crore recorded year-on-year.
In terms of growth in exchange gains, NCC Bank was in the third position during the first half of this year. The bank’s gains increased 500 per cent to Tk 120 crore.
Similarly, BRAC Bank gained 417 per cent, Dutch-Bangla Bank 403 per cent, Dhaka Bank 353 per cent, City Bank 340 per cent, Mercantile Bank 241 per cent, UCBL 205 per cent, Islami Bank 140 per cent from buying and selling USD during the first half of 2022.
Noted economist Prof Abu Ahmed told The Business Post, “If banks are given the opportunity to make such gains, they will certainly do so. However, if a bank makes a profit by breaking the law, then action should be taken against it.”
Rafiqul Islam, a chemical importer, said, “Since the USD crisis began, banks did not follow the interbank exchange rate, and I bought the greenback for opening letters of credit (LCs) at prices higher than the inter-bank rate.”
The Bangladesh Bank has served show cause notices on Thursday to six managing directors of private banks for allegedly making unusual gains by manipulating the USD crisis. The central bank had previously directed the removal of these bank’s heads of treasury.
Providing recommendations, Abu Ahmed said, “Under such circumstances, the authorities should focus on bringing down import costs and restrict those travelling abroad on pleasure trips.
Bangladesh’s economy began to rebound after the Covid-19 pandemic eased at the end of last year, but import costs increased as the domestic demand spiked.
Imports costs further rose as commodity prices skyrocketed in the international market due to the Russia-Ukraine war.
Because of these factors, Bangladesh’s import payments during FY22 rose by 35.95 per cent year-on-year to $82.49 billion, which is the highest in the country’s history.
The spike in import costs triggered a shortage of USD and put pressure on the forex reserves.
Interbank USD prices rose only 0.23 per cent in the January-March quarter this year, with the dollar crunch not increasing by much during that period. In January, the inter-bank dollar price was Tk 85.80 and in March this price rose to Tk 86.
But in the April-June quarter, USD prices rose by 8.41 per cent as the greenback crunch steadily worsened. At the beginning of this April, the USD price was Tk 86.20, which went up to Tk 93.45 by the end of June. Currently the interbank exchange rate of USD stands at Tk 95.
Since the USD crisis in the market increased, most of the banks did not exchange USD at the interbank rates fixed by the regulator. Importers have no alternatives but to open LCs by purchasing USD at higher prices.
This had a positive impact on the exchange gains for banks during the first half of this year.
The income in this regard has increased at an unusual rate, data shows. At present, importers are buying USD at rates exceeding Tk 100.
