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Increasing remittances, decreasing imports; Dollars in relief

Senior reporter.
August 18, 2022 3:23 pm
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Recently, the central bank has given various conditions for the import of goods from abroad. As a result, the amount of imports has decreased. On the other hand, increasing the flow of expatriate income or remittances has increased the supply of dollars in the market. As a result, the US dollar, which has been increasing rapidly, is now going in the opposite direction. The value of the dollar is decreasing, on the contrary, the value of the rupee is increasing.

Last week, the cash dollar rose to Rs 120 in the curb market or open market. On Wednesday and Thursday of this week, it has come down to Tk 110 to Tk 111. That is, the price of the dollar has decreased by 10 taka in the open market within a week.

Mohammad Ali, a retail dollar seller in Motijheel, told Dhaka Post that the market is going down now. Prices are on the decline. The same rate that I sold yesterday is still being sold today. I am giving a rate of 108 taka 50 paisa to those who will sell today. And I am taking 110 taka from those who will buy.

Meanwhile, the regulatory agency Bangladesh Bank has taken several steps to reduce the dollar crisis in the country. Various conditions have been given for import. Policy concessions have been given to boost remittance flows. Besides, the regulatory body is meeting with banks and money exchange institutions. A drive is underway to nab those responsible for the dollar manipulation. Punitive action is also being taken against the irregulars.

On the other hand, the central bank held a meeting with the money exchanges on Wednesday (August 17) to bring more stability to the market. In that meeting, the central bank fixed the maximum profit limit of one and a half taka per dollar. Before this, ABB, the association of bank chief executives and Bafeda, the association of foreign exchange banks, held a meeting with the central bank on Sunday. It is said that the banks themselves will decide how much profit they will make by buying and selling dollars. But the difference between sales should not be more than one rupee. Due to these measures, the price of the dollar has started to fall slightly.

In this regard, the spokesperson and executive director of Bangladesh Bank. Sirajul Islam said, ‘Money exchanges have been asked to make a maximum profit of one and a half taka by buying dollars at a price one taka higher than the average rate of commercial banks. Earlier, Bangladesh Bank has fixed the maximum profit limit of commercial banks at one taka. If the rules are not followed, action will be taken according to the law.

He said that the steps taken by the central bank to overcome the dollar crisis are getting positive results. Hopefully the market will stabilize soon.

Secretary General of Money Changers Association of Bangladesh. Helal Sikder said, “We had a meeting with Bangladesh Bank. They have allowed the maximum rate of profit up to one and a half rupees. He also said that they have given various suggestions about the dollar market situation.

In the first 16 days of this month of August, 117 million USD remittances have arrived in Bangladesh. In local currency (at 95 taka per dollar) it amounts to 11 thousand 115 crore taka.

The opening rate of import LCs has also decreased. The conditions given by the central bank to curb imports are beginning to bear fruit. According to the latest data of the Central Bank, on the 11th day of August, a total of 1.61 billion dollars worth of import credit was opened in the country. Which is 94 million dollars or 36 percent less than those 11 days in July. At that time the import was 255 million dollars.

According to the data of Bangladesh Bank, in the month of July, import credit cards worth 5.55 billion dollars were opened in the country, which is 30.20 percent less than the month of June. In June, import credit was opened to the tune of $7.96 billion. However, import credit was opened 7 percent higher in June than in May. In May, the loan was opened for 7.44 billion dollars.

Meanwhile, due to the effect of the Russia-Ukraine war, the price of goods in the world market increased a lot. As a result, there has been increased pressure on import costs for the past few months. The central bank sold a lot of dollars to maintain the supply of foreign currency in the market. Due to which the country’s foreign exchange reserves have decreased. Reserves, which crossed the $48 billion mark in August last year, fell below $40 billion.

As of August 16, the reserves stood at three thousand 954 crores (39.55 billion dollars). It is possible to meet 5 months of import expenses with this foreign currency stockpiled as import expenses of 8 billion dollars per month.

In order to reduce the pressure on the foreign exchange, the initiative to pull the import rush started from last May. On July 4, strict measures were imposed in this regard. 100% LC margin for import of 27 types of products including cars, gold, TV, refrigerators has been fixed. And the minimum rate of LC margin will be 75 percent in all other sectors except for some products including fuel, essential food products, raw materials for industrial use, capital equipment. In both cases no loan can be given for margin. This means that importer has to pay full amount in cash from his own source at the time of LC opening.

Earlier, according to the directive of May 10, the dollar holding capacity of banks and exporters has been reduced to increase the supply of dollars. Instructions are given to monetize dollars within one day of arrival of export earnings. In order to control the exchange rate of the dollar, restrictions have been placed on remittance of export earnings of one bank to another bank. The loan from EDF has been asked to be repaid only from export earnings or foreign exchange reserves. Besides, the period of relaxation in foreign exchange transactions has been extended till next December.

Meanwhile, on August 8, the central bank ordered the removal of the head of the treasury department of 6 local and foreign banks due to the evidence of storing more dollars than necessary and selling them at higher prices. The banks are – private sector BRAC Bank, Dutch