2b dollars worth of trade by Rupee
Zarif Mahmud: The use of rupees is going to start in Bangladesh’s $2 billion trade with India. Bangladesh Bank has almost finished all kinds of tests in this regard. Its use will be introduced in both countries only after a bilateral decision on some issues. India-Bangladesh Chamber of Commerce and Industry (IBCCI) has submitted the total trade account to the Central Bank in the form of a proposal. This initiative is being taken to overcome the existing dollar crisis.
Commerce Minister Tipu Munshi has presented the matter of the recently held meeting between the Bangladesh-India Commerce Minister in a written form in the Cabinet. There, he informed the prime minister about the use of rupees against the dollar as the trade medium of the two countries.
When asked to know, Bangladesh Bank Executive Director and Chief Officer Majbaul Haque told that India-Bangladesh trade medium of exchange using rupee against dollar is in experimental stage. There are other bilateral issues to be decided.
Then the banks have to prepare. But there will be a positive decision in this regard.
In response to a question whether there will be a fixed annual dollar quota for opening LCs, he said, LCs will be opened according to the needs of businessmen. But the only source of our rupees is from the export earnings of our goods in India. It’s getting a little less in that direction. We import more from India. This is why there is a trade deficit. As a result, the amount of Rupee. This is also being considered. According to related sources, if the trade starts through rupees, the businessmen of this country will have to open an account in a bank in India. That account will be opened in Rupee. From here the value of export goods will be paid to that bank in Rupee. If you import again, the LC price of import will be paid with that Rupee.
Along with the shock of Covid-19, the Russia-Ukraine war has been going on for almost a year. Due to the war, the price of the dollar in the country has gone up a lot. The crisis has also created the dollar. The price of goods has increased in the international market. It has increased import costs. As a result, the dollar-crisis is more pronounced. In such a situation, India has become interested in doing import-export trade through currency swap system or its own currency exchange.
When two countries trade with each other in their own currency, avoiding the dollar or any other hard currency, it is called a ‘currency swap arrangement’ in financial terms.
It is known that India has also started trading in rupees with Russia, Mauritius, Iran and Sri Lanka. The Ministry of Finance of the country advises the trade organizations and banks for import-export trade in Indian currency with various countries.
However, in the 1960s Qatar, United Arab Emirates, Kuwait, Oman used to accept the Indian rupee as a medium of trade. Later it was closed.
In the Bangladesh-India trade ministerial meeting held in the Indian capital New Delhi on December 22-23, India proposed to introduce the rupee as a medium of trade for both countries. Then, on the sidelines of the meeting of G20 Finance Ministers and Central Bank Governors held in Bengaluru, India last February 24-25, there was a discussion between the two countries about moving the dollar as an exchange currency. There, Bangladesh Bank Governor Abdur Rauf Talukder and Reserve Bank of India Governor Shaktikanta Das discussed the possibility of such a system, regarding the exchange of dollars into taka and rupee.
Commerce Minister Tipu Munshi said about the trade in rupees against the dollar, India gave me this proposal when I attended the meeting at the level of commerce ministers in India. However, I said that the Finance Ministry and Bangladesh Bank will look into the proposal. The central bank will take a decision after further observation.
Bangladesh has exported goods worth about $2 billion to India in the outgoing fiscal year 2021-22. On the contrary, goods worth $1,619 million are imported from India. That is, the trade deficit of Bangladesh with India is like $1,420 million. As Bangladesh’s exports are low in bilateral trade between the two countries, experts say that Bangladesh will be under pressure even if India benefits from the exchange of rupees and taka.
Due to the large trade deficit, if Bangladesh trades with India in rupees, then it may end up in a unilateral currency or rupee-based exchange structure and there is a danger that Bangladesh will be pressured to use the Indian currency at a higher rate.
Meanwhile, the businessmen of Bangladesh have welcomed the initiative to trade with India-Bangladesh in rupees and taka instead of US dollars. Because this year, the price of the dollar has increased by 20 percent around the world.
As a result, the foreign exchange reserves of both countries are strained. Bangladeshi exporters believe that if part of trade with India is done in rupees, even if not 100%, both countries will benefit. Also, as the value of the dollar fluctuates, it will be beneficial for both countries to trade in local currency to speed up the trade between the two countries. The pressure on the dollar will ease somewhat.
India-Bangladesh Chamber of Commerce and Industry (IBCCI) is working with the central bank on the matter. contacted IBCCI President Matlub Ahmed who is in Makkah over the phone to find out about this. On Tuesday, he told that if trade with India starts in rupees against dollars, it will be easier for Bangladeshi businessmen to open LCs to import products worth two billion dollars.
Now the central bank devices of both the countries are required to pay the exporters of Bangladesh.
Businessmen of both countries welcomed this initiative. Earlier, on the way out of FCCI’s business conference held at Bangabandhu Conference Center on March 12, IBCCI President said, “Bangladesh Bank has asked us for a proposal.”
We have proposed that the trade could be in rupees against two billion dollars. We have also said that if this is implemented, the pressure on the dollar will decrease. The central bank is working on this.
It is known that before the 2014 parliamentary elections, India took the initiative to trade with Bangladesh in rupees. The Indian rupee was depreciating against the dollar. Later, however, that initiative was not successful.
Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) senior vice president. Hatim said that the trade gap between India and Bangladesh is very large. As a result, India’s proposal, while sound in theory, may prove difficult in practice. Bangladesh’s export income of $200 million from India is thought to be done in Indian currency. Even if the import cost is more than $1000 million, it has to be done in dollars.
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