Dollar, taka crisis eases slightly

The persisting dollar and taka crisis eased slightly following the various initiatives taken by Bangladesh Bank, as well as banks maintaining caution. On the one hand, dollar prices decreased and on the other hand, the supply of taka currency increased, according to officials concerned of various banks.

The exchange rate of US dollars for remittance is now at Tk 114-115 a dollar, which previously increased to Tk 120 a dollar. However, the official exchange rate of US dollars for remittance is fixed at Tk 110 a dollar following a drop in remittance.

On the other hand, the liquidity crisis that hit the banks recently started to ease. Several banks also collected deposits at higher borrowing rates, but not all the banks followed suit.

Bankers said several factors contributed to easing the dollar and taka crisis. These include a drop in imports due to pressure from the central bank and a rise in remittance and export earnings as the regulating agency relaxed restrictions on the exchange rate of dollars. Besides, currency swap contributes to easing the taka crisis.

Mutual Trust Bank managing director Syed Mahbubur Rahman said, “On the one hand import dropped, and on the other hand, earnings from export and remittance rose, resulting in a fall in dollar prices. It, however, started rising again. The market is going to which direction will be understood in the coming days. Central bank is supplying taka in various processes, increasing the supply of taka, and that helped tame the market.”

A dollar crisis hit the country after the Russia-Ukraine war broke out in February 2022. Import costs soared as global crude oil and food prices increased. Bangladesh paid 8.37 million US dollars in import liabilities in June 2022. As a result, the government restricted the opening of LCs (letters of credit) and made the 100 per cent cash deposit against the opening of LCs mandatory to rein in the import liabilities. Payment of import liabilities dropped to 5.96 million US dollars this January and 4.67 million in February.

Bankers said most import liabilities against LCs opened earlier on condition of delayed payment have already been paid. As a result, demand for dollars decreased. Besides, remittance increased. Earnings from exports are also coming more than before. Overall, the pressure on dollars decreased.

The country received 2.11 million US dollars in remittances in January, which rose to 2.13 million in February. Earnings from remittance stood at 1.73 million US dollars in the first 26 days of March, which was Tk 1.69 million US dollars in the corresponding period of the previous year.

There was a deficit of 400 million US dollars at the banks’ dollar ceiling last year, but they have a surplus of 400 million US dollars now.

Plastic packaging company Q Pail Limited managing director Syed Nasir told Prothom Alo, “Banks took long to open LCs several days ago. Now they are opening LCs in a short time. Banks fix the dollar exchange rate at Tk 115-116 a dollar, which was higher several days ago.”

Meanwhile, banks started providing 7 per cent interest on resident foreign currency deposits (RFCD), and dollars from RFCD accounts can be spent randomly at home and abroad, increasing the stock of dollars and other foreign currencies to banks. Banks hold 41 million US dollars in their stocks now, which was 32 million US dollars a month ago. Besides, dollar prices also decreased in kerb markets.

Bangladesh Bank introduced a dollar-taka swap method on 19 February. Since then, banks have started keeping their additional dollars at Bangladesh Banks with different terms. Bangladesh Bank received 1.50 billion US dollars and banks got about Tk 160 billion at an exchange rate of Tk 110 a dollar in one and a half months. As a result, liquidity increased in markets and the taka crisis eased. Banks, however, are now enjoying liquidity facilities from the central bank as per their demands.

Meanwhile, banks’ call money rate also dropped to 8.90 per cent on Thursday following the rise in liquidity. The call money rate was 9.81 per cent on 29 February. The interest rate of the government loan is also not increasing. The interest rate of the 91-day Treasury bill was at 11.35 per cent in February, which remains unchanged in March. Banks’ lending rate is now fixed based on the average interest rate of treasury bills.

As the taka crisis eases, banks have gone after deposit collection. Government banks are providing a borrowing rate of 9 per cent and private banks are giving a little more. However, National Bank and United Commercial Bank are collecting deposits on the condition of doubling the amount in five years.