Bangladesh Bank strengthened dollar supportselling $4.20 billion directly tocommercial banks from the foreign exchange reserves to stabilize the forex market untiloctober20in 2022-23 fiscal year.
To meet the market demand, the Central Bank has been selling dollars from the reservesin continuation of the last fiscal year 2021-22.
Bangladesh Bank already sold a record $7.62 billion directly tocommercial banks in the last fiscal.
Market analysts said the Central Bank never released such a high amount in thehistory of Bangladesh in a fiscal year.
Even then, market volatility did not stop, they said, adding that this crisis occurred due to the significantrise in demand for US dollars in the inter-bank foreignexchange market as the country’s import demand had picked up recently.
However, the supply of dollars is less than the demand in the market. That is why,Bangladesh Bank is selling dollars from the forex reserves to the banks at interbankrates every day.
An official of the Central Bank said imports of all kinds of products, including industrialraw materials and capital equipment, increased due to the return of favorableinvestment climate in the country after the Corona.
Apart from this, the cost of imports was also increasing due to the abnormal rise inprices of all commodities including fuel oil and food products in the world market, headded.
Some steps have been taken by the central bank to reduce imports, he said, adding thatthe government has also taken some steps.
As a result, imports are decreasing significantly now, he said. The money market willalso return to normal, he mentioned.
“The central bank’s job is to keep the money market stable. The dollar was bought whenthere was a supply of foreign exchange in the market. Now that supply has dwindled,the central bank is selling dollars in line with market demand,” another BB official said.
However, the Bangladesh Bank devalued the value of taka against the dollar in the lastseveral months to stabilize the forex market.
The central bank depreciated the local currency many times against the US dollar tostabilize forex market. Taka devalued by about 12 percent against greenback in a year.
Market analysts said the central bank usually sells US dollars directly to commercialbanks to meet higher demand for the greenback. It is a sign of the economic stability ofthe country, they added.
Although in the interbank forex market, per dollar is now sold at Tk 105, the greenbackis actually sold at the rate of Tk 110 to Tk 111 in the open or curb market.
Hafizur Rashid Fakir, the owner of Bijoy Money Exchange, told Bangladesh Post, USdollar was sold at the rate of Tk 110 against greenback on Thursday.
He mentioned the dollar rate will be reduced in coming days in the open or curb marketas the supply of dollar is rising.
The central bank has no direct control of the open market. However, if the banks selldollars at higher prices, Bangladesh Bank intervenes because the banks buy dollarsfrom the central bank at the interbank rate and sell those dollars.
Even selling dollars to the commercial banks is not going to control the price.
Due to the Corona pandemic, imports fell sharply during the last fiscal year 2020-21, butremittances and export earnings have jumped.
That is why the supply of dollars in the market has increased. In that scenario, thecentral bank bought a record $8 billion in the fiscal year 2020-21 to keep thedollar afloat.
In its continuation, in the first month of July of the last 2021-22 fiscal year, 205 milliondollars were bought.
However, since August 20 in the last fiscal, the picture has reversed. As the coronasituation began to normalize, imports began to increase rapidly.
Although export earnings increased, remittance inflow continued to decline. Besides,foreign exchange reserves also decreased.
Besides, the dollar also appreciated against the local currency. As part of its move,Bangladesh Bank started selling dollars from August to keep the market stable, which isstill continuing.
According to the central bank, on August 5 last year, the dollar was sold at Tk 84.80 perdollar in the interbank market.
It is calculated that in the last 12 months, the value of the dollar against Bangladeshicurrency has increased by about 12 percent. The country’s foreign currency reservesstood at $36.11 billion on Tuesday.
On August 24 last year, the reserves crossed the $48 billion milestone, surpassing allpast records.
Ahsan H Mansur, economist and chairperson of Brac Bank, said that the reservesituation is gradually going to reach an alarming level.
“Therefore, it is necessary to ensure the IMF (the International Monetary Fund) loanquickly. At the same time, necessary initiatives should be taken to increase exportincome and remittances alongside reducing import costs,” he pointed out.