Bangladesh Bank intensifies intervention as dollar hits new high

The central bank has intensified its efforts to keep the exchange rate of the local currency stable in the face of rising demand for US dollars.

Bangladesh Bank has sold about $1.38 billion worth of US dollars so far this fiscal year to protect the taka from any volatility and meet the demand of the economy. The sales were nil during the same period a year ago. Rather, the BB bought the American greenback last fiscal year.

The accelerated sales came despite the recent advice from the International Monetary Fund (IMF) to maintain flexibility in the foreign currency market.

"We are doing it like it was done in the past," said Finance Minister AHM Mustafa Kamal yesterday, referring to the exchange rate management. 

He spoke to reporters after a meeting of the cabinet committee on public procurement.

Recently, the IMF advised Bangladesh not to intervene in the foreign exchange market.

"I don't know what the IMF has suggested. But the IMF can advise. They are an important development partner of Bangladesh and are linked with our economy. But we take decisions on our own."

The US dollar is increasingly becoming dearer in Bangladesh because of a confluence of factors such as a surge in imports, a pickup in international travels, moderate exports and falling remittance, which may create inflationary pressure.

The average interbank exchange rate was Tk 85.65 per USD on October 19, up from Tk 84.80 a year ago, BB data showed. 

Four private commercial banks were selling USD at Tk 88 to Tk 89 yesterday, according to their website.

A money exchange operator said he sold USD at Tk 90.30 yesterday. "The price has gone past Tk 90 in the last three days."

In keeping with the rebound of economic activities globally and in Bangladesh, import rose 46 per cent to $11.72 billion in July and August. Alone in August, the growth was 73 per cent, up from 14 per cent in the negative, year-on-year.  

The opening of the letters of credit for the import of the consumer goods, which include food commodities, was up 63 per cent in the first two months of the fiscal year.

The LC opening of petroleum products surged 62 per cent, BB data showed. In an encouraging development, exports grew at 38 per cent in September.

Remittance, which provided a much-needed cushion to the economy battered by the pandemic, however, fell 20 per cent in September.

The exact data on the outgoing international travels is hard to come by. But thanks to the reopening of most of the economies, Bangladeshis have begun travelling abroad, fueling the demand of the US dollar.

People have resumed going abroad for business, health, education and tourism purposes, said a central banker.

The higher price of commodities, energy and food and the high cost of shipping have stoked concerns about inflationary pressures globally as well as in Bangladesh.

However, Kamal said: "Inflation is still within our target range."

KAMAL URGES INVESTORS TO INVEST WITH A FULL UNDERSTANDING

Kamal advised investors to invest in the stock market understanding the dynamics of the market.

"When you come here to make a profit, you have to keep in mind the risk factors."

The minister said the government would keep providing policy support to the market. "But if someone thinks of making a lot of profit, it might not happen."

According to Kamal, the stronger the economy was, the stronger the capital market would be.

"I don't know if there is any other factor to inflate the market. But keep in mind that the market is very sensitive."

Kamal also responded to questions about floating shares of the state-run commercial banks.

"We took the initiative, but it has not been materialised for various reasons."

The government had planned to list the state-run commercial banks in order to boost the supply of high-quality shares to the market.

But the government retreated after it found that there was no dearth of high-quality stocks in the market, Kamal said.

At the meeting yesterday, the cabinet committee sent back a proposal from the Bangladesh Bureau of Statistics to buy laptops for the population census, said Md Shamsul Arefin, an additional secretary of the cabinet.

In June, a tender was floated to buy 3.95 lakh tabs for the digital census, but the contract is yet to be awarded as the tender process has not been completed.