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Bangladesh slashes dollar price by tk0.50 in economic reversal

Tags: dollar rate bank

The pulse of the economic rhythm in Bangladesh quickened as the buying and selling rates of the Dollar witnessed a long-awaited descent, shedding Tk0.50 after more than a year of relentless ascension. The pivotal decision emerged from the conclave between the Association of Bankers, Bangladesh (ABB) and the Bangladesh Foreign Exchange Dealers Association (BAFEDA).

The palpable shift in the financial landscape revealed that the price for acquiring dollars for export proceeds and remittance plummeted to Tk110, a notable retreat from its erstwhile perch at Tk110.50. Simultaneously, the price tag for selling dollars in import settlements now stands at Tk110.50, down from the prior Tk111. These revised rates are poised to usher in a new economic era, with their implementation set to commence today.

In a revealing conversation with reporters, ABB (Association of Bankers, Bangladesh) Chairman Selim RF Hussain underscored the rationale behind this financial pivot. Bangladesh’s foreign exchange, he asserted, finds itself in a more robust position this year than its predecessor. Consequently, the decision-makers opted for a downward adjustment in the dollar-to-taka exchange rate.

Under the revamped rates, banks are now empowered to disburse a maximum of Tk112.75 for remittances, leveraging their internal incentives. On the flip side, customers stand to gain Tk115.5, bolstered by government-announced incentives. A caveat, though, restricts banks from levying more than Tk110.50 for the sale of these dollars.

This financial recalibration follows a prior adjustment on October 31, 2023, where ABB and BAFEDA raised the official buying and selling rates for remittance and export proceeds to Tk110.50 and Tk111, respectively. In the antecedent structure, banks could procure a dollar at Tk110 and vend it at Tk110.50.

Md Afzal Karim, president of BAFEDA and managing director of Sonali Bank, explained the rationale behind the shift, stating, “The country’s current account balance and financial account were in the red last December. The present state of the current account reveals a surplus of $1 billion, accompanied by a gradual reduction in both the trade deficit and financial account deficit. Consequently, the value of the taka has experienced an increase against the dollar”.

Despite the adjustment, banks retain the flexibility to offer their own 2.5 percent incentive, coupled with the government’s 2.5 percent, for remittances. These combined incentives can potentially bring down the dollar price to Tk 115.5. Karim added that foreign loans in the private sector dwindled by nearly $4 billion in the last nine months.

In an effort to combat illegal channels of remittances, often associated with money laundering, the Bangladesh Bank implemented a regulation in August 2022 stipulating that the difference between the cash dollar price in banks and the open market should not exceed a maximum of Tk 1.5. The central bank has also initiated drives to penalize money exchange services that do not adhere to these regulations. The latest decision further mandates a reduction of Tk 0.5 in the price of the dollar in the open market.

As the meeting unfolded, it was divulged that, except for 2-3 banks, others found themselves in an overbought position in Net Open Position, indicating a surplus of dollars in their coffers. For many banks, this burgeoning surplus is viewed as a favorable shift compared to historical trends. Driven by these considerations, the decision-makers opted for a strategic downward adjustment in the dollar rate, heralding a potential economic resurgence.

The managing director of a private bank noted that yesterday’s decision signals a temporary halt to the central bank’s inclination to increase the dollar price. However, a stark disparity exists as the majority of banks are deviating from BAFEDA’s directive. They are currently procuring dollars for remittances at a rate ranging from Tk118 to Tk119 and selling them to importers at an elevated rate.

Syed Mahbubur Rahman, the managing director and CEO at Mutual Trust Bank Ltd, expressed compliance with the latest decision but underscored the importance of everyone adhering to the directive for a favorable outcome. He emphasized the need for administrative action against individuals involved in hundi (informal channels for remittance) to achieve the desired goals.

In a meeting on September 11, 2022, the ABB and BAFEDA set caps for the dollar rates at Tk108 for remittance inflows and Tk99 for export proceeds. However, the latest adjustment on October 23, 2022, saw a reduction of Tk0.50 in the dollar rate for remittances. Since then, there has been no reduction in remittances, export proceeds, and import settlements. Instead, the dollar rates have frequently experienced upward adjustments at the monthly ABB and BAFEDA meetings.

BAFEDA and ABB assumed the responsibility for setting dollar prices in September of the previous year, aiming to bring stability to the exchange rate. However, since taking the reins, the two associations had been consistently hiking dollar prices until this recent turnaround.

The post Bangladesh slashes dollar price by tk0.50 in economic reversal appeared first on Press Xpress.



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