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Experts advise against releasing extra dollars into the market
The last few weeks witnessed some instability in the normally steady local dollar market, as the currency’s value rose in the country’s inter-bank foreign exchange market.
According to Bangladesh Bank data, the dollar price rose from Tk84.8 on August 2 to Tk85.15 on Tuesday – a span of just three weeks.
Just this Monday, the price hit Tk85.1.
As a consequence of this Bangladesh Bank has started selling dollars to commercial banks again, said Serajul Islam, executive director and spokesperson of the central bank.
“Last Thursday’s forex reserve was $46.58 billion,” he added.
According to the central bank’s dollar sales and purchases, Bangladesh Bank sold $30 million in January. Six months later, on June 24, they sold $5 million. After the month of June, on August 19, BB sold another $50 million to seven commercial banks.
The central bank has kept the market stable by buying dollars continuously for the last one and a half years.
Dollar purchases registered a record average in the fiscal year 2020-21, when the Bangladesh Bank bought a total of around $8 billion from banks.
Earlier, the central bank bought $5.15 billion in the 2013-14 financial year.
That was the highest dollar buying record before the last fiscal year.
Mirza Azizul Islam, economist and former financial adviser to a caretaker government, told the Dhaka Tribune: “I think this increased demand for the dollar has been caused by a slight decline in remittances and an increase in import costs. But I still don’t see anything to worry about.”
He also said that it would be better for Bangladesh Bank to refrain from selling a large number of dollars at this time.
“The government’s decision to import food had an impact on the value of the dollar. Moreover, if there is less supply in the market, the price will go up a bit. This is a normal process of the economy,” he added.
The Bangladeshi Taka’s latest depreciation came against the backdrop of a falling trend in export earnings, along with the flow of inward remittances in July 2021.
According to central bank data, the flow of inward remittances dropped nearly 28% to $1.87 billion in July from $2.60 billion in the same month of the previous fiscal year following the second wave of the ongoing Covid-19 pandemic.
The country’s overall import payments, however, jumped by nearly 20% to $60.68 billion in the July-June period of FY2020-21 from $50.69 billion in the same period a year earlier.
Meanwhile, Bangladesh’s overall export earnings decreased more than 11% to $3.47 billion in July, the first month of the current fiscal year, from $3.91 billion in the same period of the previous fiscal year, according to the latest data released by the Export Promotion Bureau (EPB).
(DT)
