Dollar price to go up in revision process

BB to raise its exchange rate to Tk 101 under gradual relaxing of control


JASIM UDDIN HAROON | Published: January 31, 2023 09:07:58 | Updated: January 31, 2023 11:38:07


Dollar price to go up in revision process

Amid persistent persuading by economists for allowing market-determined exchange rates, the central bank of Bangladesh is set to raise its dollar price by 1.0 per cent to Tk 101.

The revised rate takes effect from the first week of February, people familiar with the matter told the FE about the development coming in the wake of dollar crisis with its cascading impact on the economy.

The Bangladesh Bank (BB) is making its dollar costlier as the central bank has planned to raise its exchange rate to market-equilibrium level within next few months.

Currently it sells the US dollar at Tk 100 each, much lower than the market rates.

The BB move, evidently, comes in line with the suggestions from the International Monetary Fund (IMF) team that visited Dhaka recently to reach a uniform rate of dollar on the market.

Seeking anonymity, a BB official said the central bank wants to reach the target of a unified market rate of the dollar, which was suggested by the IMF representatives during their recent visit.

As part of a plan, the central bank had already increased the rate by Tk 1.0 on November 10 to fix it at Tk 98 each, but the interbank weighted average rate was Tk 103 that time.

"We need to further lessen the rate gap. We want to do it slowly in phases, so that it cannot trigger any panic on the market," said sources.

They opined that the measure would protect the forex reserves, already under stress in the wake of dollar appreciation and mounting import costs against falling earnings from export and remittance amid global doldrums set off by the Russia-Ukraine war.

Economists also see regulated lower rates of the greenback as a major disservice behind the ebbing forex earnings from the two main sources as the exporters and remitters may be dodging official channels for higher gains from currency cartels.

Currently, many government organisations are buying the dollar directly from the BB following a big gap on the market. Banks now collect the greenback at Tk 107 when it is remittance. And the dollar price for exporters is pegged at Tk 102. The interbank taka-dollar rate is over 106.

So, the state-owned enterprises which procure oils and other energy products have been directly purchasing the greenback from the BB.

Bankers think the move will cast more pressure on the banks' local-currency reserves, as the financial institutions will have to use more local currency to meet their foreign-currency obligation.

Mahbubur Rahman, Managing Director and Chief Executive Officer of Mutual Trust Bank (MTB) Ltd, feels that local-currency reserves of the banks that usually facilitate import of most essential items, like fertilisers, food-grains, and primary energy will be under pressure because of the dollar-exchange-rate revision.

"But we need a single market rate," he says, in tune with economists calling for a unified exchange rate.

Economists suggest further revision of bank deposit and lending rates to enhance liquidity in the banking system in sync with dollar-rate deregulation.

jasimharoon@yahoo.com

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