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The country’s foreign exchange market has remained volatile even though the Bangladesh Bank has depreciated the taka against US dollars four times this year.
The latest devaluation came yesterday when the BB depreciated the inter-bank exchange rate by Tk 0.25 to Tk 86.70 per USD.
Because of the currency devaluation, the importers had to buy the American greenback at as high as Tk 95 to pay import bills yesterday.
Banks usually sell US dollars to importers, under the arrangement known as BC (bills for collection) selling rate, by Tk 0.05 with the inter-bank exchange rate.
But, managing directors of four banks, requesting anonymity, say that they are now compelled to ignore the BC selling rate, which was quoted at Tk 86.75 per dollar yesterday.
This is because banks have to spend Tk 94-Tk 95 to purchase one dollar.
Bankers blame the rising import payments for the ongoing volatility in the foreign exchange regime.
The coronavirus pandemic had disrupted the supply chain around the world, which subsequently pushed up the commodity prices in the global market. The Russian invasion of Ukraine has deepened the crisis.
The central bank has depreciated the local currency on a regular basis in recent months in a bid to contain imports. But economists have urged the central bank to weaken the taka at a faster pace.
The BB devalued the local currency by Tk 0.20 to Tk 86.45 a dollar on April 28. The inter-bank exchange rate stood at Tk 84.80 on May 9 last year.
The country’s import payments increased 44 per cent year-on-year to $61.5 billion in the first nine months of the current fiscal year. Exports grew 33 per cent to $36.6 billion during the period.
Against the backdrop, the trade deficit rocketed to an all-time high of $24.90 billion between July and March.
The central bank is also injecting greenbacks into the market at a large volume to support banks such that they can settle import payments smoothly. It has so far sold around $5 billion this fiscal year.
Still, it has failed to keep the foreign exchange market stable.
The central bank bought a record volume of US dollars, amounting to $7.93 billion, from local banks in the last fiscal year when imports plummeted amid the coronavirus pandemic. This boosted the country’s foreign exchange reserves, which stood at more than $48 billion in August last year.
But the higher-than-expected import payments are now squeezing the reserves as it fell to $44 billion on April 30.
The reserves will fall further as the country is scheduled to make import payments to the Asian Clearing Union (ACU), an arrangement by which participating countries settle payments for intra-regional transactions.
Bangladesh, Bhutan, India, Iran, the Maldives, Myanmar, Nepal, Pakistan and Sri Lanka are members of the Tehran-headquartered ACU, which was established in 1974.
(TDS)
