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Bangladesh - Bank & Finance - December 28, 2023

Banks doing brisk business for dollar

Mahfuja Mukul: The fixed price of import dollar is Tk 110. But in reality, no dollar is available at this price. Have to count Tk 123-124. Sometimes up to Tk 130 is taken. This is how dollar business is going on in almost all banks of the country. A handful of influential traders can buy dollars from banks at a slightly lower rate, but ordinary traders have to buy dollars at higher rates than the declared price to pay import duties. Similarly, in opening letters of credit (LC), influential businessmen get benefits from banks, but many ordinary businessmen are struggling to open LCs due to dollar crunch.
When the importers are buying dollars by Tk 12-13, sometimes Tk 15-20 more than the declared price, the two organizations of bankers have reduced the declared price of the dollar several times. According to the announcement, the price of the dollar is falling, but in reality, the dollar is not matching the price.
Some businessmen said on condition of anonymity that they are facing more problems in opening loans this month than ever before. Dollars are not available at the announced price. So, they are forced to buy dollars at a higher price. That extra cost is being paid for in a different way.
Meanwhile, according to the terms of the International Monetary Fund or IMF, additional dollars must be added to the reserves within the current month. That is, by the end of December, Bangladesh will have to increase the net or actual reserves to $17.78 billion. Net reserves are now slightly over $16 billion.
In this situation, Bangladesh Bank has reduced the supply of dollars in the market to maintain reserves. Besides, the size of the Export Development Fund (EDF) has been reduced from $7 billion to $310 million.
According to Bangladesh Bank sources, Bangladesh Bank is planning to buy dollars from commercial banks and take the reserves to the required level on the last day of December. Because of this, Bangladesh Bank is buying dollars from some Shariah-based banks that are in acute liquidity crisis.
A top bank chief executive, speaking on condition of anonymity told that those in power now are buying dollars at high prices, ignoring the central bank’s directives. Those who are buying dollars at higher prices, are also charging higher prices to pay import duties. Business impacting banks are doing more. After the start of the Russia-Ukraine war in February last year, the crisis in the world supply system started, the prices of various consumer goods increased. Expenditure increases in fuel and transport sectors. As a result, the demand for dollars for imports in the country increases. The official price of the dollar then started to rise from Tk 86, which is now Tk 110. But unofficial prices are higher. It was at this time that Bangladesh Bank conducted various tests on the price of the dollar. Banks are now tasked with setting the price of the dollar, but they do so on the advice of the central bank. In this case the market situation remains neglected. As a result, it can be seen that the price of dollar has been reduced by Tk 1 in three rounds in the last one month.
Banks are now fixing the price of the dollar at Tk 109.50 on expatriate and export earnings. On Thursday, Foreign Remittance House collected Tap Send Dollars at Tk 120 and Small World collected Tk 117.80. Some Shariah-based banks in crisis and some conventional banks are said to be buying expatriate income at Tk 122.
On the other hand, in the case of buying expatriate income, the banks are also giving an equal amount of incentive in addition to the government’s two and a half percent incentive. As a result, the price of the dollar falls more than the declared rate, and importers have to buy dollars at a higher price. The dollar price of imports is officially Tk 110, but in some cases, one has to pay Tk 128-129.
Along with importers, exporters are also in danger. Because the banks are selling their export income dollars to others. Later they have to buy dollars again at a higher price to import raw materials.
Banks are not following the price set by the two bankers’ associations for the dollar. Many economists advocate leaving the exchange rate of the dollar to the market.
In this regard, the executive president of BKMEA, the association of knitwear industry owners, Mohammad Hatim told, “The bank is doing business with dollars now. Because, the price of the export dollar is only Tk 109.50. And import dollar price is keeping Tk 115 to Tk 128. Selling our export earnings dollars to others. Then we have to buy it again at a higher price. Banks have created syndicates with dollars. As a result, who will take responsibility for the damage that is being done to the exporting company? We can’t take it.’
Banks are not following the price set by the two bankers’ associations for the dollar. Many economists advocate leaving the exchange rate of the dollar to the market. The adoption of flexible exchange rates has also been emphasized by the IMF. However, the central bank is not interested in leaving the exchange rate of foreign currency on the market.
Ahsan H. Mansoor, executive director of research institute Policy Research Institute told, “If it was one taka more or less than the announced price, then it might have been right.” The problem is, the difference is huge. This is having an impact at the consumer level as well. For this, the price should be fixed close to the market. Dollar should be traded from the reserve at the market price.
Foreign exchange reserves rose slightly after receiving loan installments from the IMF and Asian Development Bank (ADB). On December 15, $68.98 million of the second tranche of the IMF loan and $400 million of the ADB loan were added to the reserves. The total or gross reserve has increased to $2,604 million. And according to IMF’s BPM 6 calculation method, the amount of reserves is $2,068 million. However, net or real reserves are slightly more than $16 billion.
Bangladesh Bank officials say that in the last few days of this month, more money from foreign loans will be added to the reserve. Besides, the reserve will be increased by buying dollars from the bank. Bangladesh Bank will try its best to meet the goals of IMF. Earlier, the company could not meet the conditions related to reserve conservation.
General Secretary of Money Changers Association Helal Uddin Sikder told, “The dollar crisis is not over yet. However, we are selling according to the rules.’ But after searching the alleys, it was found that whoever is selling what they can in the retail market in Oligli. There are no rules. There are also allegations that dollars are being paid in exchange for bribes. But the dollar is not available in the normal process.

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