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Economists have praised the move to adopt alternative currencies, such as the Indian Rupee and Chinese Yuan, in foreign projects and bilateral trade to ease the foreign exchange reserve.
As of Tuesday, the forex reserve stood at $31.11 billion, with the balance of payment in a tight situation due to a negative trend in export earnings.
Bangladesh Bank has conducted trials to soon begin trading with India using the Rupee instead of the US Dollar. Additionally, the government has found a workaround for stalled payments owed to Russia for a nuclear power plant—settling them in Chinese Yuan.
Regarding the pressure on reserves, former Bangladesh Bank governor Dr. Atiur Rahman said that the government has already initiated multiple measures to reduce the import of luxury products.
“We should introduce a market-determined single rate of the American Dollar to improve the situation. We can also reduce this pressure by mutual trade in our domestic currencies. However, we can do this up to a limit. The extent of the trade deficit will be the deciding factor here,” Dr. Atiur told Daily Sun on Wednesday.
The eminent economist believes Bangladesh can begin experimenting with Taka-Rupee exchange based on export volume to India. “Our import from India is about $14 billion. So we can do trading of at best $2 billion in Taka-Rupee exchange arrangements. The rest of the import will have to be still paid in dollars,” added Prof. Atiur.
Dr. Atiur further mentioned that the same strategy could be implemented for Taka-Yuan exchange. “For this, we need to allow designated banks to open cross-currency accounts and prioritize items for which this limited international trade will take place,” he said.
According to the former governor, specialized debit cards with values in Taka and Rupee could be a useful tool for making medical payments in India, in addition to tourism-related expenses.
“This too will fall into the category of non-dollar exchange arrangements. India and China are making a number of such experimental exchange arrangements. We too can try this. Bangladesh Bank
has already started making such innovative exchange arrangements following consultation between Governors of related countries. Let this be an experimental move. However, the reserve situation will improve dramatically if we trust the market in addition to these innovations,” added Dr. Atiur.
State-owned Sonali Bank and private Eastern Bank are in the process of opening Rupee accounts with two Indian lenders – State Bank of India and ICICI Bank. The Indian lenders will also open similar accounts in Bangladeshi banks.
China has also offered a currency swap with Bangladesh, which the government is currently reviewing.
Policy Research Institute Executive Director Ahsan H. Mansur sees no immediate solutions with alternative currencies, stating that they would help government or business entities in the long term.
“We hear the discussion for a while. However, the values of alternative currencies are very low compared to the American Dollar. We also think about the interests of the business community. How are they taking the alternative currency for the transaction of international trade,” Dr. Mansur told Daily Sun.
t the Bangladesh-India ministerial meeting on trade held in New Delhi on December 22-23 last year, India proposed introducing the Rupee as a medium of trade for both countries.
To make payment settlements with Russia, Bangladesh will use a Chinese bank, and Russian beneficiaries will receive payments using China’s Cross-Border Interbank Payment System (CIPS), a limited alternative to SWIFT for Yuan-based payments.
(DS)
