Banks look abroad as dollar demand peaks
The rise in overseas spending by the middle class and cash transfer to foreign countries have pushed the supply-demand gap in the greenback to an all-time high.
Bankers point to the purchase of the currency by around one lakh hajj pilgrims this year for their expenditure as another reason for skyrocketing demand for dollar notes.
“Around 1.25 lakh Bangladeshis travel abroad a month, of which 50 percent for business, treatment and travel purposes," an immigration official said, pointing to 15 percent yearly growth in Bangladeshi travellers.
"If you look at the number of patients visiting Mount Elizabeth Hospital in Singapore, you will see a third of them from Bangladesh. Most use notes for paying bills and other expenditures," said a private bank official.
In a bid to cope with the higher demand for dollars, some banks, including Standard Chartered Bank, have moved to collect notes from different sources such as London Exchange House.
A high official of the central bank that endorses any import of foreign currencies said Bangladesh Bank gave StanChart a go-ahead on August 4 to import a maximum of $10 million and the Office of the Chief Controller of Import and Export permitted the bank on October 4 to import forex notes from Travelex Banknotes Limited in London.
“We are approaching to import dollars to increase the currency inflow, but the total amount has not been fixed yet,” said Bitopi Das Chowdhury, StanChart's head of corporate affairs.
The bank official also said her bank sought a tax rebate on the import of dollars and approached Finance Minister AMA Muhith in this connection.
StanChart is the lone foreign bank that has a record of importing foreign currencies a few years back.
Meanwhile, most members of Bangladesh Foreign Exchange Dealers Association have sought the central bank's permission to bring dollar notes from their Nostro Account at New York.
Ashim Kumar Saha, head of treasury at NCC Bank, pointed out that the bank had been facing a severe cash dollar crisis for the last few months.
“We're negotiating with StanChart for buying some notes from them,” Saha said.
Asked about the recent peak in demand for the foreign currency, an Eastern Bank official said most of their clients use cards for forex transaction.
Eastern Bank is in talks with the central bank to import dollars from the nostro account, he added. Previously, private banks were used to exporting cash currencies with permission from the central bank but now the trend is reverse, the official added.
Due to the tight situation of foreign cash notes in all scheduled banks, the private banks are currently unable to purchase such notes from the local financial market.
The local kerb market rate is higher than the bank rate, which also contributes to the slow inflow of foreign currency notes, especially US dollar, in the banking channel.
Tassaddek Hossain Khan, manager of Aabco Money Changer, said demand for cash dollar increased heavily in the kerb market for which they can sell with a good difference of prices with banks'.
Another money exchange house official echoed Khan's views.
The use of dollars in underhand dealings and asset buying abroad has also fuelled demand for the greenback.
“Some unscrupulous houses sell dollars to those who use the currency for bribing,” said Ahsan Ullah Russel, manager of James Money Changer.
The dollar was selling at Tk 72.10 yesterday at different exchange houses, where the bank rate was 70.80.
Despite huge demand for dollar notes, the country's overall balance of payment situation maintains a surplus position in the local market.
Data shows a surplus of $76 million in the first month of fiscal 2010-11 against the surplus of $486 million in the same month a year ago.
The overall balance of payment was $2.8 billion in fiscal 2009-10, as Bangladesh recorded export earning at $16.23 billion and remittance earning $11.61 billion. During the period, the country spent $21.38 billion for importing products.