Before the pandemic set off in March, the BB was continuously injecting dollars into the banking sector
Bangladesh Bank is continuously purchasing dollars from banks to keep the exchange rate stable in the face of a gush of greenback into the banking system.
So far this fiscal year, the central bank purchased greenbacks worth about $4.50 billion from banks, according to data from the central bank.
Before the pandemic set off in March, the BB was continuously injecting dollars into the banking sector.
Foreign exchange reserves stood at $41.4 billion as of Thursday, which is an all-time high.
The flood of dollars is because of the spike in remittance and the import slump, said BB Spokesperson Md. Serajul Islam.
In the first five months of fiscal 2020-21, exports raked in $15.8 billion, up 0.9 per cent year-on-year, according to data from the Export Promotion Bureau.
During the period, remittance stood at about $11 billion, up about 42.9 per cent year-on-year, according to data from the BB.
In the first four months of the fiscal year, imports were down about 13 per cent to $15.8 billion.
“Every bank has a limit on holding US dollars. If the remittance and export income of a bank is more than the payment of import duty, that’s the surplus dollar in that bank,” said a high official of the central bank requesting anonymity as he is not authorised to speak with the media.
The central bank purchases those surplus dollars from banks, he added.
Most of the banks are rolling in dollars as the remittance inflow is increasing due to the disruption of illegal channels like hundi amid the pandemic and the 2 per cent cash incentive on remittance, said Md. Abdul Halim Chowdhury, managing director of Pubali Bank.
To keep the exchange rate stable, the BB is purchasing the excess supply, said AB Mirza Azizul Islam, a former caretaker government adviser.
If the central bank did not purchase the excess supply of US dollars, the value of Bangladeshi currency would be strong against dollars, which would negatively affect the exporters and remitters, he added.
Due to the excess supply of dollar in the banking system, the foreign exchange rate dropped to Tk 84.8 yesterday from Tk 84.9 a year earlier, according to the data from the BB.