BB keeps on injecting dollar into market | The Daily Star
12:00 AM, July 20, 2018 / LAST MODIFIED: 12:45 AM, July 20, 2018

BB keeps on injecting dollar into market

It pumped $2.31b in fiscal 2017-18

Bangladesh Bank has continued its practice of injecting dollars into the market this fiscal year to cool down exchange rate volatility, with $62 million being pumped in just the first 17 days of the month.

In fiscal 2017-18 the central bank injected $2.31 billion -- the highest since fiscal 2009-10 -- but the move did not yield the desired result thanks to higher import payments against lower export earnings.

The central bank injected only $175 million in the market in fiscal 2016-17 and none the previous year.

The Association of Bankers, Bangladesh (ABB), a platform of the chief executive officers of private banks, has recently urged the central bank to inject more greenbacks into the market to address the shortage of the currency.

They also urged the central bank to allow them to be more flexible with the selling rate for bill for collection (BC), which is the rate at which banks make import payments.

The current rate is not viable for them due to an upward trend in the inter-bank exchange rate.

The inter-bank exchange rate of the US dollar stood at Tk 83.75 on Wednesday, up from Tk 80.64 a year earlier, according to data from the central bank.

The rate surpassed the BC selling rate on July 2, which forced banks to increase the BC selling rate simultaneously to avoid incurring losses.

The banks set the BC selling rate level with the inter-bank rate of Tk 83.75, meaning they are still facing losses, said an official of a private bank.

Between fiscal 2009-10 and fiscal 2016-17, the central bank bought back huge stacks of greenbacks from the market. It had to reverse its stance from this fiscal year because of bulging import bills.

Import payment has significantly increased in recent months and the latest trend of opening letters of credit indicates that it would shoot up further, said Syed Mahbubur Rahman, chairman of the ABB.

The reason being, the country has started to import liquefied natural gas to enable the plants to run uninterruptedly at full steam.

The price of petroleum products in the global market has also maintained an upward trend, which will pile on more pressure, said Rahman, also the managing director of Dhaka Bank.

“The banks should take a cautious policy while importing goods to thwart any attempts of over-invoicing.”

The government should also take initiatives to increase the remittance flow to cool down the existing situation of the foreign exchange market, he said. 

The country's current account is already facing huge deficits for the higher import payments.

Bangladesh's current account deficit is on course to cross the $10 billion mark in fiscal 2017-18 for the first time in history. Between July last year and May this year, the current account deficit stood at $9.37 billion in contrast to $2.21 billion in the negative a year earlier

Export earnings and remittance inflows grew 7.79 percent and 17.09 percent respectively in the first 11 months of last fiscal year, but they were inadequate to counteract the current account imbalance due to a 25.52 percent rise in import payment, said a BB official.

The government should take immediate measures to increase export earnings and remittance to ease the pressure on the exchange rate, said AB Mirza Azizul Islam, a former caretaker government adviser.

Stay updated on the go with The Daily Star Android & iOS News App. Click here to download it for your device.

Type START <space> BR and send SMS it to 22222

Type START <space> BR and send SMS it to 2222

Type START <space> BR and send SMS it to 2225

Leave your comments

Top News

Top News