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Bangladesh Bank keeps injecting dollar to prop up public sector banks

  • Published at 09:25 pm June 20th, 2019
File photo of a man counting US dollars Syed Zakir Hossain/Dhaka Tribune

Demand for greenbacks rises as capital machinery for major infrastructure projects being imported by state-owned commercial banks

Bangladesh Bank has continued to inject US dollars in the banking sector to stabilize the volatile forex market. 

The central bank has sold $2.30 billion to banks as of June 18, this fiscal year, according to the central bank data. 

In the previous fiscal year of 2017-18, the central bank had sold $2.31 billion to commercial banks. 

The inter-bank exchange rate of the US dollar stood at Tk84.50 on June 18, up from Tk80.56 two years earlier, increasing almost by Tk3.94.

Four state-owned commercial banks are the major clients of US dollar sold by Bangladesh Bank, as the public sector commercial banks alone bought nearly 95% of the total $2.30 billion. 

To meet the growing demand of greenbacks and stabilize the foreign exchange market, the central bank has been pumping the US dollar in the banking system for long, a top central banker has said.

The need to sell the US dollar by the central bank became obvious, given that the dealing of greenbacks in the public sector banks had risen abnormally in the recent period, as a number of large infrastructure projects were being implemented through the public sector banks concerned, he added.

On June 18, state-owned Agrani Bank sent a letter to the Bangladesh Bank asking for $106 million greenbacks to meet its demand to meet import finance bills.

Talking to Dhaka Tribune, Agrani Bank managing director Mohammad Shams-Ul Islam said: “We are opening the letters of credit (LCs) of various projects of the government. As a result, there is a high demand for dollars in our bank.”

“Yesterday, we paid a total $119 million import bills of Bangladesh Petroleum Corporation (BPC), Bangladesh Power Development Board (BPBD), Liquefied natural gas (LNG) and several companies,” he added. 

State-owned Sonali Bank is financing several mega projects including Ruppur Nuclear Power Plant, according to Sonali Bank sources. 

Talking to Dhaka Tribune, Sonali Bank MD and CEO Md Obayed Ullah Al Masud said: “Due to a demand-supply gap, we often face problems in opening LCs for big projects.”

“To address the situation, the government has to increase foreign direct investments (FDI) in the economy. If we get deferred payment opportunity in opening LCs for big projects, then there will be no problem,” he said.

Due to more selling, foreign exchange reserve of Bangladesh Bank  stood at $31 billion as of May 31, 2019, down from $32.27 billion a year earlier.

According to the latest Bangladesh Bank data, trade deficit stood at $11.92 billion in July-March of FY19. The figure was $13.14 billion in the same period last year.