Post-lockdown foreign travel pushes up fluctuating dollar rate in kerb market
The exchange rate for the US dollar in the open or kerb market crossed Tk 90 for the first time ever this week, worrying Bangladeshis looking to travel abroad and pushing up the prices of some imported goods.
Businesses engaged in importing goods expressed concern as the dollar price is fluctuating in the open market, which also influences the movements of the US dollar price in the banking channel.
According to Bangladesh Bank (BB), the interbank dollar exchange rate on Sunday (Oct 24) was Tk 85.70. On the other hand, different money exchange houses were selling the greenback at Tk 90.10 on the same day, which is the highest ever.
Business leaders said the dollar price fluctuation is creating uncertainty among the businesses as they cannot be sure what the price of goods they are looking to import would be in 5-10 days.
A former governor of BB, wishing anonymity, told our sister newsagency UNB that the dollar price has jumped recently due to two reasons: firstly, increased travel abroad for different needs including study, health and entertainment following the COVID-19 restrictions being eased, or lifted around the world.
Secondly, increased capital flight from Bangladesh.
Giving an example, the former governor said that some recent incidents of banking- and e-commerce-related scams hint at the increased capital flight from Bangladesh.
Economists said that Bangladesh’s economy remains on the right track and there is no reason to be worried as such fluctuations in the exchange rate happen sometimes.
Former adviser of caretaker government Dr. Mirza ABM Azizul Islam said that import demand has increased in the post-lockdown time as the industrial production shows a rising trend.
The price increase of LNG and petroleum products in the global market is also another cause to raise the dollar demand as Bangladesh uses USD to meet all kinds of import payments, he said.
The country’s forex reserves are at their highest ever, export income and inward remittance flow also good, so there is no reason to be worried about a weakening taka at this stage, but a cautionary measure is to be taken for stabilizing the prices in local commodity markets, Mirza Aziz said.
Former governor of BB Dr. Salehuddin Ahmed said that the exporters become happy if taka becomes weak, but it creates pressure to raise prices in the domestic market.
He said the central bank sometimes relaxed its policy in order to increase dollar exchange rate so that the expatriates could send money to the country in taka and exporters could earn more.
The BB earlier spent about Tk700 billion in the fiscal year 2020-21 to purchase additional dollars from the market to keep the money market stable.
Bangladesh Bank has supplied over $1360000000 (136 crore) to different scheduled banks to meet market demand of foreign currencies.
The central bank will supply dollars and try to keep the exchange rate of taka stable against the US dollar, a senior BB official said.
At present the central bank has enough forex reserve to meet import demand for 11 months, whereas enough to meet 3 months' import spending is considered a good amount, the official said.
Bangladesh forex reserve grew up to $48.09 billion September 1, of FY22 from $32.57 billion in March FY 20. Since the declared lockdown due to the outbreak of Coronavirus in March FY20, the import demand has fallen and the inward remittance flow has gradually increased.
Bangladesh received $24.77 billion inward remittance in FY21, up 36 percent from FY20.