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Dollar rate ups import costs

Mehedi Hasan
19 Oct 2021 00:00:00 | Update: 19 Oct 2021 14:48:18
Dollar rate ups import costs

Import cost has increased as the US dollar rate kept rising against local currency for the last three months, creating an additional burden on local importers to foot bills.

Importers said import costs increased as the local currency was devaluating against the US dollar. This trend would negatively impact goods in the local market, they said.

The interbank exchange rate stood at Tk 85.65 per dollar on Oct 17, up from Tk 85.60 on Oct 14, Bangladesh Bank data show. The exchange rate was Tk 84.81 on Aug 2. In the last three months, the local currency devaluated Tk 0.84 against the greenback.  

Importers also accused some banks of intentionally creating a dollar crisis and imposing a high rate in case of opening letters of credit for imports.

They said the Bangladesh Bank should look into it, as commercial banks should not charge dollar rates exorbitantly against L/C opening.

Mohammad Mustafa Haider, Group Director of T K Group of Industries, told The Business Post that the price of consumer goods would increase in the local market as the import cost had risen drastically due to the hike of US dollar rate.

He said that most banks now are imposing a high rate in case of opening a Letter of Credit (LC) by taking advantage of the ongoing dollar crisis. 

Bangladesh Garment Manufacturers and Exporters Association’s former President Md Siddiqur Rahman said that the cost of imports rose due to the increasing trend of the US dollar rate. 

“Banks are now making quick bucks from importers. If the regulators like the Bangladesh Bank, or the finance ministry do not intervene immediately then industrial products will see price hike, and pace of industrialization will be hampered badly,” a Chattogram-based industrialist, preferring anonymity told The Business Post.

But bankers said the US dollar value was increasing as import payment had rebound due to the reopening of the country’s economy and business.

From July to August of the current fiscal year, LC settlement stood at $10.77 billion, up by 45.31 per cent from the same period of the previous fiscal year, as per the BB data.

Zahid Hussain, former lead economist of the World Bank, Bangladesh, said that the rising price of commodities in the global market pushed up the import cost but the import volume did not increase. “It is not a sign of economic recovery,” he said, noting that import spending increased due to the rising trend of commodity prices in the international market.

The price rise of imported goods in the international market will also affect the domestic market, making it difficult to control the inflation rate, he said.

Mercantile Bank’s Additional Managing Director Matiul Hasan said that the declining trend of remittance and the end of deferral support on payments for imports were other reasons behind the volatile situation in the foreign exchange market. 

The inflow of remittance dropped for the fourth consecutive month in September this year, as the illegal cross border transaction “hundi” system saw a rise following strict restrictions.

The inflow fell by 19.74 per cent year-on-year in September to $1.72 billion, as per the latest data from the Bangladesh Bank. 

BB continues to sell dollar

To tackle the devaluation of the local currency, the central bank started to sell US dollar to banks from August this year. 

As per the BB data, from August to Oct 12, the BB sold $1,193 million to the country’s banking sector. 

The central bank had earlier purchased $205 million till July. In the last FY, it purchased $7.93 billion from the local banks.

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