Move towards single exchange rate

BB dollar price to rise by Tk 4

| Updated: February 25, 2023 21:18:49

BB dollar price to rise by Tk 4

Bangladesh Bank's dollar-exchange rate may rise to Tk 105 by June to secure a unified market rate, sources said, as much of the greenback remains in holdback in hope of higher gains.

The move now gets underway as economists and exporters press for unified market rate of the US currency and it is also known as a core recommendation in the International Monetary Fund (IMF) loan package.

Even in the half-yearly monetary policy statement (MPS), announced last month, the central bank has mentioned that the difference in the regulated rates will be maximum two-percentage points.

As part of the parity move, the central bank has raised the dollar-taka exchange rates in the past several months. The BB exchange rate was Tk 96 on September 12 last year. Now, the BB is selling the dollar to banks at Tk 101 each, which is planned to be revised further upward to cross Tk 105 by June.

Seeking anonymity, a BB official says they are going to raise the rate further to Tk 102 in the coming month and the upward revision of the greenback will continue to cross Tk 105 by June.

Citing the MPS, the official said they need to reach the goal anyhow by June next so that the MPS target of keeping difference in rates by two percentage points is achieved.

Apart from the BB-charged rate, there are multiple exchange rates on the money market. These are Tk 103 for exporters and Tk 105 for remitters. In terms of import, the rate is calculated on the basis of weighted average of the rates for export and remittance with added Tk 1.0, according to the central bank.

The central banker said one of the suggestions of the IMF is leaving the rate to the market to determine. "If we can reach the targeted rate by June next, we'll be very close to the unified market rate."

The BB official thinks that the measure will help protect the country's foreign-exchange reserves, which are already under stress in the wake of dollar appreciation and mounting import costs amid global supply-chain disruptions following the Russia-Ukraine war.

As part of the reserve-shielding move amid the ongoing volatile global economic situation, the BB is encouraging import of only most essential goods.

So, the banks that facilitate import of such essential items will face some pressure to meet their dollar requirement from the central bank.

Bankers and economists hail the move, hoping that it will help stabilise the market of foreign currencies with inflows of more foreign currencies by way of preventing perceived leaks and laundering of both export proceeds and worker remittances.

Mahbubur Rahman, Managing Director and Chief Executive Officer of Mutual Trust Bank (MTB) Ltd, says it will be good for the economy as fast as it takes the rate close to the market.

He mentions that there are too many rates that are, in fact, creating uncertainty and confusion on the forex market. There is a perception now prevailing that exporters are delaying bringing in export proceeds to gain more on assumptions that the rate will rise further in days ahead.

"If we can make a unified rate, we can avoid such things and it will certainly help inflow of more foreign currencies," the banker told the FE.

Chairman of local think-tank Policy Exchange of Bangladesh Dr M. Masrur Reaz also disapproves of multiple exchange rates with a difference among the official rates being Tk 6.0, which is not good for the economy.

"I think keeping difference of the rates within two percentage points is a good first step and it will help ease the ongoing instability regarding the forex market," he said.

He notes that the central bank is trying to save the dollar reserves by way of tightening demand, which is okay for now but not in the long run.

To ensure stability, he suggests that the demand and supply of the foreign currencies be kept to a rational level by taking complementary measures required for the sake of stability of the market.

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