Farashuddin recommends introducing unified exchange rate

Former Bangladesh Bank governor Mohammed Farashuddin has recommended introducing a unified exchange rate instead of multiple exchange rates.

"I request the central bank to execute a unified exchange rate, including the incentives on remittance, to cool down the forex market," he said at the third AKN Ahmed Memorial Lecture on central banking, at Bangladesh Institute of Bank Management (BIBM) yesterday night.

He said the actual beneficiaries are not getting the incentives on remittance, the middlemen are getting it.

The difference between the kerb market and official exchange rate will have to be only Tk 3-4, as per the economist.

Mentioning the currency swap introduced by the central bank, the former BB governor said the swap is an incorrect decision.

"I want to know how commercial banks are managing US dollar for swap with the central bank."

Farashuddin, also the chief adviser of East West University, recommended creating opportunities so that people can deposit funds in banks for just six months without facing any question.

He identified inflation, lending rate and exchange rate as the three major challenges for now.

The economist said the central bank will have to control the high inflation successfully in the upcoming days.

There was a coordination council headed by the finance minister previously, but this is now absent, he said, adding that this should be introduced again to fight the current crisis.

Bangladeshi currency remained stable for a long time, but the global market created pressure to depreciate taka, he added.

This is a good news that remittance increased 39 percent year-on-year in February. 

In response to the Farashuddin, Bangladesh Bank Governor Abdur Rouf Talukder said: "Now there is no multiple exchange rate officially and we are not taking kerb market into consideration now, as it is a very small market."

"In case of currency swap, the central bank is withdrawing local currency as we are pumping US dollar to banks from reserve."

The central bank is extending liquidity to banks through swap, as the banking sector is facing liquidity crisis at present, he added.

"The forex market is stable now and our currency is not depreciating thanks to the ongoing political stability."

"All indicators are becoming well after the national elections."