Home ›› 29 Jun 2020 ›› World Biz
Bangladesh Bank has provided an opportunity for people to take foreign currency abroad through banking channel.
This opportunity has been given by the BB by relaxing the ban on foreign exchange transactions and the move worries experts and insiders as the easy flight of foreign currency will deplete the much-needed forex reserve of the country.
Sources in BB said if the more foreign currency goes out, there may be a shortage in the country's foreign exchange reserves.
Economists in the country have expressed concern that this could have a multi-faceted negative impact on the country’s financial condition and the move will not help knock the economy into shape.
They said the country's export earnings and remittances from expatriates have already fallen sharply due to the coronavirus pandemic.
Foreign Exchange Reserves are now rising on foreign debt. If the import of food and other items increases to smooth out the effects of the coronavirus pandemic, it will be difficult to meet the import cost with reserves. Under these considerations, precaution is needed by the central bank.
According to BB sources, foreign exchange transactions are being facilitated to increase foreign investment in the country. This will increase the confidence of foreign investors who will come forward to invest. But the economists provide a different opinion. They say the time and way the foreign exchange transaction policy is being waived, will cause the big amount of foreign currency to go abroad from the country. Before it could be smuggled out, now it can be siphoned out through banking channel.
Another source said that the BB had objected to the simplification of the foreign exchange transaction policy but it was not considered by authorities concerned.
According to a research report by Transparency International Bangladesh (TIB), there are 2.5 lakh foreigners working in Bangladesh. They are illegally siphoning out around Tk 26,000 crore worth of foreign currency every year. The corruption watchdog did this research on the basis of the data of 2016 and 2019. The results were released in February this year.
According to the TIB research report, the real salaries of foreign nationals are being hidden in the organizations where they are working. In collusion, part of the salary is being paid legally through banking channel but a large part is being illegally paid in cash.
In this context, the former governor of the central bank Dr Salehuddin Ahmed said that due to the Covid-19 pandemic, the main source of foreign exchange earnings, export earnings and remittances have declined. Import costs are now lower. Imports will increase whenever trade begins to turn around after the unprecedented situation.
He said this could lead to a foreign exchange crisis. Now the reserves are rising due to foreign debt. Although the flow of debt has increased now, it will shrink after a while.
“But the country’s imports will increase. Farmers are not selling paddy now. For this reason, rice may also have to be imported. Due to these reasons, the demand for foreign currency will increase in the future,” he said.
He said if the country’s income decreases, the crisis of reserves may loom, as a result, meeting the cost of imports will be a big challenge for the government.
“The value of the local currency — taka — can decrease, the purchasing power of the people can also be reduced, the rate of inflation will increase. At the same time, maintaining economic balance is likely to be a multi-faceted challenge,” said former governor adding that in this situation, it is not right to give so many discounts to a section of people who will benefit from lax foreign exchange transactions.
Former finance adviser to caretaker government Dr AB Mirza Azizul Islam said the government has to take prudent foreign exchange policy amid coronavirus pandemic.
The weak foreign exchange policy can negatively impact the balance of payment, he said.
BB has recently relaxed its policy of taking foreign currency abroad. The central bank has issued a couple of circulars in this regard.
One such circular issued on June 18 said if foreign companies, be they listed in the stock market or not, will enjoy the opportunity to sell or transfer their shares and take abroad up to Tk 10 crore in foreign currency without the approval of Bangladesh Bank.
However, respective banks have been asked to audit the foreign company's assets and keep an eye on whether there has been any abnormal growth.
Earlier, the approval of the central bank was required to take these funds abroad. In addition, an investor can take the full amount of the dividend of the listed company and the money from the sale of shares abroad as per the rules.
In other sectors too, the rules for foreign investors to take capital and profits have been simplified, easing the flight of capital abroad. In these cases, the approval of the central bank is not required.
ask/wi
