SIDDIC ISLAM |
April 06, 2022 09:00:02
April 06, 2022 16:37:58
The central bank has pumped over US$4.0 billion into Bangladesh’s overheating foreign-exchange market in nearly eight months to check rise in the value of the US currency.
Officials say the demand for the greenback has increased following the ongoing Russia-Ukraine war alongside economic rebound from the Covid-19 pandemic.
“The Russia-Ukraine war has pushed up the demand for the US dollar globally, including Bangladesh,” a senior official of the Bangladesh Bank (BB) told the FE.
He also said higher prices of commodities, including fuel oils, on the international market also enhanced import-payment obligations in recent months.
As part of the move, the central bank sold US$91million to banks, particularly state-owned commercial banks (SoCBs), in last two working days, adding up to the eight-month tally.
The dollar was quoted at Tk 86.20 on the inter-bank foreign-exchange market on Tuesday, unchanged from the previous level, according to the market operators.
A total of $4.13 billion has been sold from the foreign-exchange reserves since August 18 of the current fiscal year (FY), 2021-22, to the commercial banks as part of the central bank’s ongoing liquidity support, according to latest official figures.
The central bank is providing such forex support to the banks directly for settling import-payment obligations, particularly for six essential items, including fuel oils.
Other items are LNG (liquefied natural gas), food-grains, fertilizers, coronavirus vaccines and electricity, according to the officials.
“We may continue providing such foreign-currency liquidity support to the banks in line with the market requirement,” another BB official told the FE, without elaborating.
Market operators, however, say the demand for the US currency is still prevailing high mainly due to higher import payments, particularly for petroleum products and consumer items, including food-grains.
The settlement of letters of credit (LC), generally known as actual import, in terms of value, rose by 52.01 per cent to $52.60 billion during the July-February period of FY’22, from $34.61 billion in the same period of the previous tax, according to the central bank’s latest statistics.
On the other hand, the opening of LCs, generally known as import orders, grew by more than 49 per cent to $59.46 billion during the period under review from $39.87 billion in the same period of FY ’21.
On the other hand, lower flow of inward remittances has also pushed up pressure on the inter-bank forex market, they explained.
Inward remittances dropped nearly 18 per cent to $15.30 billion during the July-March period of FY’22 from $18.60 billion in the same period of FY’21, the BB data show.
In the meantime, the country’s forex reserves have maintained a downturn in the last couple of months following lower flow of inward remittances and higher import-payment obligations.
Bangladesh’s forex reserves dropped by $3.78 billion to $44.28 billion on Monday from $48.06 billion counted in August, according to official figures.
Talking to the FE, treasury head of a leading private commercial bank (PCB) said the forex market is still facing a big mismatch between inflow and outflow of foreign exchange despite higher export earnings in recent months.
“Unnecessary imports should be discouraged immediately considering the current forex-market situation,” the private banker noted.