Banks get $752m in 19 days

In a bid to cool down the volatile foreign exchange market, the Bangladesh Bank has pumped some $752 million into different banks in just 19 days of January.

Despite continuous US dollar support from the central bank, banks are still facing a US dollar shortage. Businesses and importers are complaining that banks are very reluctant to open LCs for imports.

The central bank is currently providing USD support to banks only for covering government import payments.

BB is selling US dollars to banks at the rate of Tk 100 per USD. But the inter-bank exchange rate stood at Tk107 per dollar, said a BB official.

He said that the country’s forex reserve is still falling and it has created concern among various stakeholders of the economy. That’s why BB is trying to protect the reserves.

On Thursday, the country’s gross foreign exchange reserve stood at $32.47 billion which was at a record $48 billion in August 2021.

Banks – especially the state-run ones – are taking USD support from the central bank for settling import payments of Bangladesh Petroleum Corporation (BPC), Bangladesh Agricultural Development Corporation (BADC), Bangladesh Chemical Industries Corporation (BCIC) and other government agencies.

The banking regulator injected $12 billion into the market in the last year, of which over $5 billion was injected in the last five months, as per the central bank data.

The local currency Taka devalued by 24.41 per cent against the USD this year last year despite a series of initiatives to cool down the forex market.

The Bangladesh Bank August of 2021 started pumping USD to the forex market when the banks began facing USD shortages due to the growing import payments, triggered by economic recovery from the Covid-19 crisis.

This crisis intensified just a few months later when Russia invaded Ukraine in February last year. The war further disrupted the global supply chain, which in turn caused food prices to skyrocket in the international market.

The forex market will stabilize soon because the LC opening has come down, said Bangladesh Bank governor Abdur Rouf Talukder when unveiling the Monetary Policy Statement for the second half of this fiscal year.

From July to December of this fiscal year, LC opening fell by 22.52 per cent to $34.10 billion while LC settlement rose by 7.71 per cent to $38.41 billion, as per BB data.