Amid the ongoing crisis of foreign reserve, the exchange rate of the US dollar rose by Tk 12-13 a dollar. As local banks are competitively purchasing US dollars at Tk 122-123 per dollar from foreign exchange houses and money transfer firms, remittance earnings increased by about 35 per cent in the first four days of this month.
As per an earlier announcement, banks were to sell dollars at Tk 111 a dollar for import liability and purchase Tk 110.50 a dollar for remittance and export earnings. Since banks are exchanging dollars at higher rates and showing different prices in documents, a new crisis appears in the dollar market.
Amid such a situation, two associations of the bankers -- the Bangladesh Foreign Exchange Dealers Association (BAFEDA) and the Association of Bankers Bangladesh (ABB) – will hold a meeting this week in consultation with the Bangladesh Bank. According to the bankers concerned, a decision on the rise in the exchange rate of dollars is likely from this meeting.
The Bangladesh Bank used to fix exchange rate. But BAFEDA the ABB has been doing so since September 2022 following the dollar crisis caused the Russia-Ukraine war.
What is the actual price?
ABB and BFEDA have set the exchange rate at Tk 110.50 a dollar for remittance and export earnings, and that is nearly ineffective as banks are purchasing remittance income at Tk 122-123 per dollar. Banks that have import liability were also purchasing dollars at this rate, resulting in a rise in the dollar price by 12-13 per dollar at one go.
Data available on the websites of the foreign exchange house show, that while sending money to Bangladesh, most of the money changers were offering an exchange rate of Tk 110.50 a dollar, but US-based Small World provides a little over Tk 122 a dollar.
Banks appealed to Bangladesh Bank to reconsider its action against the treasury chiefs of 10 banks. As the central bank has yet to give any decision, bank officials are in a state of fear as they have been compelled to purchase dollars at a higher exchange rate
Several local banks including Islami Bank, Social Islami Bank, Union Bank, South Bangla Bank, Southeast Bank, Dutch-Bangla Bank, Pubali Bank and BRAC Bank receive remittances through Small World.
Besides, Taptap Send also announced it will exchange currency at a rate of Tk 122 a dollar to send money to Bangladesh. Western Union's website also shows the company maintained an exchange rate of Tk 122 per dollar. The government also provides an incentive of 2.5 per cent on the incoming remittance.
Bankers involved in purchasing remittances said all exchange houses are offering an exchange rate of Tk 122-13 per dollar, with some firms doing it openly while some are doing it secretary. Besides, those who receive remittance through financial services like bKash and Rocket are getting a slightly lower price.
ABB vice chairman and City Bank managing director Mshrur Arefin told Prothom Alo, “Foreign exchange houses are asking for an exchange rate of Tk 122-13 per dollar, and if we buy at this higher rate where we would sell it. That is why we somewhat stopped purchasing dollars.”
He further said they could not understand why dollar prices increase that much and they would seek consultation from the central bank on what they should do now.
Meanwhile, the exchange rate of dollars is set at Tk 111 for importers, but banks are selling dollars at Tk 123-124 and showing Tk 111 a dollar in documents.
Remittance sees rise
Expatriates remitted USD 463 million in 1-6 November this year -- up by 35 per cent from the corresponding period of the previous year. The country received USD 343 million in the first six days of November last year.
The inflow of remittance reached a four-month high to USD 1.97 billion in October – up by 30 per cent year-on-year.
In the meantime, banks appealed to Bangladesh Bank to reconsider its action against the treasury chiefs of 10 banks. As the central bank has yet to give any decision, bank officials are in a state of fear as they have been compelled to purchase dollars at a higher exchange rate.
Treasury chiefs of two banks said banks that operate exchange houses in foreign countries are purchasing dollars at a higher exchange rate, resulting in the rise of dollar price, and these banks are even purchasing dollars at a rate higher than other foreign exchange houses' rate. Besides, money launders are also using these channels. As a result, dollar prices spiked, they said.
Private research firm Policy Research Institute executive director Ahsan H Mansur told Prothom Alo, "Existing method of fixing exchange rate should continue until the next election. The exchange rate is becoming market-based gradually. Besides, banks continue to buy and sell dollars as per the demand, and that will reduce pressure on foreign reserves. However, the exchange rate must be left to the market, and currency price will increase temporarily, but that will drop later."
*This report appeared in the print and online editions of Prothom Alo and has been rewritten in English by Hasanul Banna