Taka becomes weaker again
Taka devalued by Tk.50 – for the sixth time in four months
The central bank has raised the selling rate of dollars from reserves by Tk0.50 to Tk111 in an attempt to align the rate with that in the local market.
Consequently, the taka has depreciated against the dollar for the sixth time since July in the current fiscal year.
Despite these adjustments, however, the disparity between the market and interbank rates persists, compelling the central bank to actively intervene in the currency market to stabilise it.
Keep updated, follow The Business Standard's Google news channel
The central bank sold the dollar at Tk108.70 at the beginning of July. Accordingly, the value of taka has decreased by 2.12% in the past four months.
The central bank had earlier said selling dollars from reserves would follow the interbank rate. But, on Wednesday, banks' import settlement rate was followed for selling dollars, according to the treasury officials of three state-owned banks.
According to the latest decision, banks will sell dollars at a maximum of Tk111. However, the maximum rate of Tk114 can be charged in case of interbank sales.
These decisions were finalised at a meeting between the Association of Bankers Bangladesh (ABB) and the Bangladesh Foreign Exchange Dealers Association (Bafeda) on Tuesday.
To intervene in the market, the central bank is selling an average of $70 million daily from the country's reserve. The Bangladesh Bank also could not stop selling the greenbacks from the reserves due to the dollar crisis in the market.
According to the central bank, $3.75 billion was sold from reserves to state-owned banks in the first three months of the fiscal 2023-24. In October, the financial market regulator sold around $1 billion from reserves. The central bank had to support dollar-starved banks in settling international payments. Earlier, the central bank had sold $13.58 billion from reserves in FY23.
A senior official of the central bank told TBS that the dollars from the reserves are used in the payment of letters of credit (LCs) of imported goods including fuel, fertiliser and daily necessities. Support from the reserves to banks increases the ability of commercial banks to open LCs, he said.
The central bank pegged the dollar at Tk95 in the first week of September last year. According to the central bank, the dollar's value has increased by about 16% to Tk110 in the past one year.
Since the beginning of July, the Bangladesh Bank has not announced the dollar price separately. In selling dollars from reserves, the central bank follows the dollar rate in the interbank market. As a result, in the first week of July, the taka devalued to the highest value of Tk2.85. Since then, the central bank has been increasing the selling price of dollars from the reserves according to the interbank dollar rate.
A treasury official of a state-owned bank told TBS, "Due to the dollar crisis, we are not able to make the payment of government LCs properly…We have to defer many payments as we do not have enough dollars in hand. We asked the central bank on Wednesday for more than $400 million to meet the demand. But we have not received even 5% of this. Dollars are not available from other banks either, because they are also in a dollar crisis."
Ahsan H Mansur, former economist of the international monetary fund (IMF), said the central bank is not able to reduce the crisis by increasing the dollar price little by little. The central bank should make the value of the dollar market-based.
The country's foreign exchange reserves will stand at $19.29 billion after clearing the import bills of $1.21 billion for the September-October period with the Asian Clearing Union (ACU) next Monday, according to Bangladesh Bank sources.
Central bank data shows that the country's forex reserves stood at $20.50 billion on 31 October, as per the Balance of payments and international investment position manual (BPM6) calculation.
