Bangladesh Bank has sold $1.33 billion to banks as of Monday
High demand for the US dollar by commercial banks remained unchanged for nearly one and a half years now as they continue to buy dollars from Bangladesh Bank (BB) to meet enhanced import payments.
The central bank has sold $1.33 billion to banks as of yesterday. The amount in the last fiscal year was to the tune of $2.31 billion, meaning banks bought $ 190 million per month on average from the central bank.
The average monthly dollar purchase for July-January (as of 28th) period of the current fiscal year also stands at $190 million, as the total sale as of yesterday hit $1.33 billion.
Economists and bankers said the reasons behind the high sales of the US dollar are the several mega projects being implemented in the country, and an increase in import of raw materials and other commodities.
Speaking to the Dhaka Tribune, Ahsan H Mansur, executive director of the Policy Research Institute of Bangladesh (PRI) said that before the national election, the central bank had sold the US dollar because the government needed to stabilize the foreign exchange market.
"But how long can the central bank keep this up?” Mansur inquired, adding that foreign exchange reserves decreased by $1 billion in January.
Reserves stood at $31 billion as of January 16, 2019, down from $32 billion a month earlier.
"Since export earnings are not growing as compared to imports, the taka must be devalued against the US dollar," he suggested.
As of January 27, 2019, the inter-bank exchange rate of the US dollar stood at Tk83.95, up from Tk78.88 two years earlier, increasing by little more than Tk5.
Managing Director of Bank Asia Md Arfan Ali said that rising exchange rates will put pressure on inflation as the prices of imported goods will increase.
"Devaluing the local currency puts pressure on the liquidity market as the settlement of letters of credit [L/Cs] will require more money," he added.
Arfan also explained that there will be more pressure on the US dollar in the coming days for the mega projects to be implemented.
Agrani Bank Chairman Dr Zaid Bakht suggested the central bank continue selling US dollars as after the general election, private investment is expected to grow.
"There will be a lot of pressure on the US dollar. In this case, the Bangladesh Bank should continue to sell it,” opined Zaid.
According to data by the Bangladesh Bank, in the first five months of the current fiscal year (FY2018-19), export earnings stood at $16.77 billion.
Import payments rose by 6.64% and stood at $23.43 billion during the same period , up from $21.97 billion during the corresponding period of FY2017-18.
During the July-November of FY2018-19, import of capital machinery was to the tune of $1.92 billion, textile fabrics and accessories for garments $3.30 billion, intermediate goods $3.19 billion, while the value of raw cotton and synthetic fibre stood at $1.14 billion.
At the end of November 2018, Bangladesh's trade deficit stood at $6.65 billion.