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Bangladesh is yet to allow Rupee in foreign trade: BB

Published : Friday, 23 September, 2022 at 12:00 AM  Count : 433
Business Correspondent

Bangladeshi businesses won't be able to use Indian Rupee for foreign trade as Bangladesh Bank (BB) is yet to enlist Rupee to settle letters of credit (LC).
BB spokesperson and executive director Md Serajul Islam said the central bank is yet to enlist Rupee for foreign trade. He said BB is reviewing the currency diversification in foreign trade to reduce sole dependency on US dollar.
Before allowing any foreign currency for trading the central bank has to maintain an exchange standard and stability in line with the IMF standard, he said.
Businesses leaders said if trade between Bangladesh and India take place in local currencies, pressure on US dollar reserves and ongoing forex market volatility would come down to some extent.
India is the second largest source of imports of raw materials and other goods and services for Bangladesh industrial raw materials, capital machinery, cotton, yarn, fabrics, and chemicals. Bangladesh imported $16.19 billion worth of goods and services from India in 2021-22 against $2 billion of exports.
On September 15, the BB allowed banks to open accounts in Chinese currency Yuan because of its recognition as a global currency. IMF recognized 5 countries' currencies as high-value currencies. Yuan was recognized as the IMF's high-value currency basket in 2016.  
The issue of trading in local currencies came to the fore after the State Bank of India (SBI) issued a notice on August 24 saying it would allow LCs making use of taka and rupee instead of the US dollar and other foreign currencies.
But unless BB officially allows settling LCs using the local currencies, it must be shelved. BB on September 15 however allowed local banks to maintain accounts with their corresponding lenders or branches abroad in Chinese yuan.
This was to help local businesses settle foreign trade transactions using yuan. Similar instructions will be necessary by the central banks of both countries for allowing the local businesses to settle LCs using the rupee and the taka.
IN present situation at least $2 billion worth of trade, which is equivalent to what Bangladesh exports, can be in local currencies, said Abdul Matlub Ahmad, president of the India-Bangladesh Chamber of Commerce and Industry.
Experts of both countries can sit together he said to find a solution to run the whole of bilateral trade in taka and rupee, he said. Similar to using Chinese yuan and Russian ruble to retain US dollar reserves in the time of crisis, Ahmad said.
Mohammad Ali Khokon, president of Bangladesh Textile Mills Association, welcomed the proposal of trading in taka and rupee. Md Saiful Islam, president of the Metropolitan Chamber of Commerce and Industry, said had there been no special terms and conditions trade in taka and rupee trade would be beneficial to both countries.
Mohammad Hatem, executive vice president of the Bangladesh Knitwear Manufacturers and Exporters Association, said if the Indian businesspeople accept taka and their Bangladeshi peers accept rupees, then there would be no   problem.
Ahsan H Mansur, executive director of the Policy Research Institute of Bangladesh, said enabling a vibrant trade in rupee and taka would require years but BB can start the process from now.
The economist, however, warned that Indian businesses might not initially show interest in doing foreign trade using taka instead of the dollar.

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