BB steps in to keep exchange rate stable

Bangladesh Bank is continuing to purchase US dollars from commercial banks to keep the exchange rate stable.

The central bank went on a buying spree recently amid an increase in the inflow of the greenback ahead of Eid-ul-Fitr, the biggest festival of Muslims. The move is also helping banks to avoid crossing the limit for their foreign currency holding.

So far this month, data shows that the central bank has purchased around $350 million from different commercial banks to take this fiscal year's tally to $3.9 billion.

"The supply of dollars is increasing significantly ahead of Eid and due to a rise in exports. Our decision to buy is helping the exporters and remitters," said a senior BB official.

The official said imports are not rising though exports and remittances are witnessing moderate growth.

BB data shows imports grew only 4.8 percent in July-April of the outgoing fiscal year. On the other hand, exports rose nearly 9 percent in the first 11 months of the fiscal year. Remittance is stable and the inflow will go up this month because of Eid spending.

BB has been buying dollars for the past four fiscal years to manage the exchange rate and prevent the greenback from falling against the local currency. If the greenback falls, exporters and remitters would lose out on value, while importers would benefit.

On the other hand, data shows that the central bank has not sold any dollar to banks since 2012-13.

The BB bought dollars worth $3.75 billion in 2014-15, $5.15 billion in 2013-14 and $4.54 billion in 2012-13.

With purchase of the greenback, Bangladesh's foreign exchange reserves are surging to new heights every year; the reserves currently stand at nearly $29.5 billion, which is enough to meet import bills of more than eight months.

"Imports are not rising in line with the growth in remittance and export. So, our foreign currency holdings are going up day by day," said a treasury official of a private commercial bank.

Though the inter-bank exchange rate remains stagnant at Tk 78.40 a dollar, the taka slightly appreciated in the last few weeks, treasury officials said.

Data from Bangladesh Foreign Exchange Dealers' Association shows that the average rate for import payments of a US dollar went down to Tk 78.81 yesterday from Tk 78.83 on June 15. The rate was Tk 78.90 for a dollar early this month.