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Despite taka depreciating, banks selling dollars at Tk3-4 extra

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In the space of 12 days, Bangladesh Bank has recently twice devalued the exchange rate of taka against the US dollar.

The central bank fixed an exchange rate of Tk86.7 against the dollar after devaluing the currency by Tk0.25 on Monday (May 9), which followed a devaluation of Tk0.25 on April 27.

Despite the devaluation the scheduled banks are selling US dollar at Tk 3-4 higher, while in the kerb market the dollar is selling at around Tk93.

The Chief Financial Officer (CFO) of several private banks confirmed to UNB that they are selling the dollar at Tk 89-90 as they are purchasing dollars at a higher rate than BB’S exchange rate from other private banks.

Bangladeshi taka depreciated by over 25 percent after the latest deprecation of taka, in the last 13 years. In February 2009, the exchange rate per US dollar was Tk69.

But how does it affect the masses, if at all?Talking with UNB, the CFO of a private bank said that a consumer has to pay Tk 125.66 now to buy goods or services from the global market which he could buy at Tk100 13 years ago.

It means the common people have to bear the brunt of local currency depreciation against the US dollar as Bangladesh is importing goods mostly by using dollars.

The exchange rate of US dollar against Bangladeshi taka has been fixed by the government since independence. The taka was declared convertible (exchangeable) for enhancing foreign trade on March 24, 1994. And in 2003 this exchange rate was made floating. From then on, the national currency is no longer devalued or revalued by declarations.

However, although the exchange rate was floating, it was not entirely market-based. The central bank has always had indirect control over it through its buying and selling of dollars, in what is called a ‘managed float’.

Earlier, the BB purchased $8 billion from different banks in the fiscal year of 2020-21 to maintain the exchange rate of taka, when import orders decreased severely for worsening pandemic.

The central bank, however, supplied $ 2.5 billion so far in the current fiscal year as the import demand increased by 50 percent after the pandemic situation.

Former adviser of caretaker government Dr. Mirza ABM Azizul Islam told UNB that import demand has increased in the post lockdown time as the industrial production shows a surge.

The price increase of LNG and petroleum products in the global market is also another cause to raise the dollar demand as Bangladesh uses USD to meet all kinds of import payment, he said.

The country’s forex reserves remain better till now, export income and inward remittance flow also good, so there is no reason to be worried about weakening taka at this stage, but a cautionary measure is to be taken for stabilizing the price of local commodity markets, Mirza Aziz said.

Former governor of BB Dr. Salehuddin Ahmed said that the exporters become happy if taka becomes weak, but it creates pressure to raise prices in the domestic market.

He said the central bank sometimes relaxed policy to increase dollar exchange rate so that the expatriates and exporters could send more forex income to the country.

Source: United News of Bangladesh