Published at: The Financial Express, March 02, 2019
The central bank has injected US$1.66 billion so far this fiscal year into the market, but the local currency keeps losing its value against US dollar, officials say.
As part of the step, the Bangladesh Bank (BB) is providing such foreign exchange support to help banks foot import payment bills, particularly for oil, capital machinery for power plants, liquefied natural gas (LNG) and fertiliser.
Since July of the current fiscal year, the central bank has sold $1.66 billion to the commercial banks as part of its ongoing support, according to latest official figures.
The market operators on Wednesday said the value of local currency against the US dollar keeps falling, despite the central bank’s continued foreign currency support.
The Bangladesh Taka (BDT) depreciated by 20 poisha against the greenback in the inter-bank foreign exchange market from January 03 to February 26, mainly due to higher demand for the greenback, they added.
The US dollar was quoted at Tk 84.15 each in the inter-bank foreign exchange market on February 25 against Tk 84.12 of the previous working day. It was Tk 83.90 on January 02.
It also remained unchanged at Tk 84.15 on Wednesday.
Raising the allocation of Export Development Fund (EDF) scheme will help increase the inflow of foreign currency in the local market, a senior official of the Bangladesh Bank (BB) told the FE on Thursday.
The central bank has already increased the allocation of EDF scheme by US$500 million to $3.50 billion from $3.0 billion earlier.
“Such enhancement of the EDF scheme will also help minimize the mismatch between demand and supply of the foreign exchange in the market,” the central banker noted.
Talking to the FE, another BB official said the central bank may continue providing such foreign currency support to the banks in line with the market requirements.
He also expected the demand for the US currency to weaken gradually after the higher inflow of inward remittances along with export income in the coming months.
Meanwhile, the country’s forex reserves rose to $32. 23 billion on Wednesday from $ 32.16 billion of the previous working day despite selling of the US dollar to the banks.
Echoing the central banker, a senior treasury official of a leading private commercial bank told the FE that the enhancement of EDF scheme would help boost liquidity in the market.
“The demand for the greenback may ease in the coming months if the existing import payment pressure on the economy continues,” the treasury official noted.
Mosleh Uddin Ahmed, managing director (MD) and chief executive officer of privately-owned National Credit and Commerce (NCC) Bank Limited, said the demand for the greenback eased slightly in the market the last couple of days.
“But it’s a temporary phenomenon. The demand for the US dollar may move up again in the near future,” the senior banker predicted.
He also suggested increasing the inflow of foreign direct investment (FDI) to keep the forex market stable.
“There is no alternative to increasing FDI,” he noted.
He also urged the authorities to implement infrastructure projects with funds from foreign sources, which can help the market get stable.