Home ›› 16 Jun 2023 ›› Front
Both opening and settlement of letters of credit (LC) for imports have dropped in recent times but banks in Bangladesh are still facing a US dollar crisis because of due payments and a higher outflow than the inflow.
During the July-May period of FY2022-23, LC opening fell by 25.34 per cent and LC settlement fell by 9.76 per cent owing to the austerity measures by the government and strengthened monitoring of imports by Bangladesh Bank (BB). LC opening for capital machinery import fell by 55 per cent to $2.69 billion while LC settlement for this also fell by 29.47 per cent to $3.21 billion, as per BB data.
However, LC settlement for petroleum imports rose by 7.75 per cent to $8.68 billion despite the austerity measures.
On the other hand, BB is continuing to pump US dollars into the banking sector to tackle the falling trend of the country’s foreign exchange reserves.
The banking regulator pumped over $13 billion into banks from July to June 15 of this fiscal year, as per BB data. It also sold $71 million to banks on Thursday.
Bankers have said that they are very conservative about opening LCs due to the US dollar shortage.
Talking to The Business Post, Pubali Bank Managing Director (MD) and CEO Mohammad Ali said, “We are still cautious about opening LCs. In the past, a client used to get an LC limit of $300 million but now the same client is getting a $120 million limit.”
Meanwhile, the volume of foreign currencies held by commercial banks is still falling as the outflow of dollars is higher than the inflow.
The gross foreign currency balance with the banks had plunged to $5,120 million in May from April’s $5,497 million, according to the latest BB data.
May’s figure represented the lowest volume of forex holdings by the banks since January when it stood at $4,849 million.
Mutual Trust Bank MD and CEO Syed Mahbubur Rahman told The Business Post that the foreign exchange market is still volatile only due to the dollar shortage. Also, the USD outflow is higher because of the due payments.
USD exchange rate gap keeps falling
Meanwhile, the exchange rate gap of the US dollar is continuing to come down as the central bank is set to introduce a uniform exchange rate next week through the Monetary Policy Statement for the first half of FY2023-24.
The interbank exchange rate for dollars hit a record high of Tk 109 per dollar on Thursday, up from Wednesday’s Tk 108.70.
On January 31 this year, the rate was Tk 105.35 per dollar.
The interbank exchange rate was ineffective for a long time because there was a gap between official and unofficial exchange rates.
BB is currently selling USD at Tk 106.50 per dollar from its reserves. On the other hand, the USD rate for remittance collection is Tk 108.50 per dollar and Tk 107 for export earnings.
