Interbank dollar rate hits record high

The interbank exchange rate for the US greenback has reached a record high of Tk 108.75 per dollar as Bangladesh continues to face a shortage of the foreign currency.

Banks traded each dollar ranging from Tk 108.50 to Tk 108.75 on May 22, down 24.28 per cent from a year ago, data from Bangladesh Bank showed.

The interbank exchange rate increased almost every working day this month after starting out at Tk 106.80 per dollar on May 1.

The local currency has been facing depreciation for the last one year due to higher import payments and slower-than-expected export earnings and remittance inflow.

In the first nine months of 2022-23, import bills dropped 12.33 per cent year-on-year to $53.93 billion. As a result, the trade deficit, which occurs when a country's imports exceed its exports, declined 41.6 per cent year-on-year to $14.61 billion in July-March.

In April, remittance declined 16.27 per cent year-on-year to $1.68 billion. Overall, money transferred by migrant workers and non-resident Bangladeshis living abroad grew 2.36 per cent to $17.71 billion in July-April.

Export earnings dipped 16 per cent year-on-year in April with overall receipts growing by 5.38 per cent to $45.67 billion in the first 10 months of the ongoing fiscal year.

Ahsan H Mansur, executive director of the Policy Research Institute of Bangladesh, says the depreciating trend of the interbank exchange rate is a good thing.

The foreign exchange market should be allowed to determine the exchange rate based on the demand-supply method of the greenback, he said.

If the exchange rate for the dollar is kept strong artificially, it will not bring any good for the economy, added Mansur, also a former official of the International Monetary Fund.

The country's foreign exchange reserves stood at $30.18 billion on May 18, down 28.5 per cent year-on-year.

Mansur also suggested the central bank follow a uniform exchange rate to bring back stability in the foreign exchange market.

Last month, banks decided to offer remitters Tk 108 for each greenback instead of Tk 107.

Banks also decided to increase their purchase prices of the dollar from exporters to Tk 106, up from Tk 105 earlier.