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Some experts suggest depreciating BDT faster against USD

Published : Tuesday, 17 May, 2022 at 12:00 AM  Count : 794

A number of economists and senior bankers urged the Bangladesh Bank to immediately depreciate the local currency to a large degree against US dollars.
The gradual depreciation followed by the BB since the global economy rebounded from the pandemic late last year may not be effective as banks have already started charging more than Tk 95 per dollar for businesses to settle imports. This means that the interbank exchange rate set by the central bank has become inoperative due to higher import payments and outbound tourists, expenditure for education and patients going abroad for treatments.
Few days back the BB has already depreciated Bangladesh Taka (BDT) that the exchange rate now stands at 86.70 a dollar after the BB devalued the local currency by Tk 0.25 on May 9.
Banks usually sell US dollars to importers, under the arrangement known as BC (bills for collection) selling rate, by adding Tk 0.05 with the inter-bank exchange rate. But importers now have to pay Tk 94-95 to purchase a dollar from banks.
Similarly, some banks are offering between Tk 92 and Tk 95 per dollar to remitters to encourage them to send their money through their channel.
The interbank rate set by the central bank has not been effective as the foreign exchange regime is facing volatility of a high degree, a senior banker told the Daily Observer.
In this mismatch exchange rates to bring an order the central bank should address the issue promptly or else the instability will spread further. Against the backdrop, the interbank exchange rate should be set on the basis of the demand and supply of the greenback, he said.
Ahsan H Mansur, executive director of the Policy Research Institute of Bangladesh, called for raising the inter-bank rate to at least Tk 92 per dollar immediately.
Mansur added that the attempts to keep the depreciation of the local currency subdued will put an adverse impact on exporters as well.
A trader in the kerb market said clients had to count Tk 94.30 to purchase a dollar.
Between July and April, migrant workers sent home $17.30 billion, down 16.2 per cent year-on-year, data from the BB showed.
He described more than $7 billion in expenses to settle import payments for a single month as illogical and urged the central bank to insulate the foreign exchange reserves from the ongoing global volatility.
The reserves fell to $41.9 billion on May 11 from $46.15 billion on December 31, driven by surging imports needed to feed the economy rebounding from the coronavirus pandemic.
Between July and February, import payments shot to $52.60 billion, of which at least 72.38 per cent was spent on essential commodities.
Mustafizur Rahman, a distinguished fellow at the Centre for Policy Dialogue, said that the central bank should depreciate the local currency quickly.
"Raising margin on the opening of LCs alone can't offset the volatility in the foreign exchange market. A sharp one-time depreciation of the local currency is essential."
Syed Mahbubur Rahman, managing director of Mutual Trust Bank, thinks the current situation warrants more depreciation.











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