What currency swap facility is Bangladesh Bank set to introduce for exporters?
The rates and swap durations have not yet been finalised, but the Bangladesh Bank will soon issue a detailed circular specifying them
The central bank is set to introduce a currency swap facility that will allow exporters to temporarily exchange foreign currency from their Exporters' Retention Quota (ERQ) accounts for local currency to meet urgent cash needs.
A currency swap facility will allow exporters to obtain taka against their ERQ-held foreign currency for a fixed term and later receive the same amount of foreign currency back after returning the taka.
A senior Bangladesh Bank official told The Business Standard that many exporters keep foreign currency in their ERQ accounts for future import payments or in anticipation of dollar appreciation but often face cash shortages. "The swap arrangement will help them access funds easily while encouraging banks to finance exporters," he added.
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Explaining the process, the official said, "If an exporter swaps one dollar with a bank for a month, the bank will pay them the equivalent in taka at the day's rate. After one month, the dollar will be returned to the exporter's account, and they will repay the taka."
Separate interest rates will apply for both currencies, with banks earning interest on taka and exporters on dollars.
The rates and swap durations have not yet been finalised, but the Bangladesh Bank will soon issue a detailed circular specifying them.
Business leaders and analysts have welcomed the initiative, saying it could ease exporters' cash constraints and reduce pressure on the volatile dollar market.
What is an ERQ account
According to the central bank, the ERQ account is a special foreign currency account where exporters can retain a portion of their export earnings. The retention rate varies by sector: up to 35% for ICT exporters, 30% for knitwear, agriculture, and jute exporters, and 7.5% for woven apparel.
These accounts can hold currencies such as the US dollar, pound sterling, euro, or yen. Given that most Bangladeshi exports are settled in dollars, the bulk of ERQ deposits are dollar-denominated.
Currently, exporters hold about $500 million in their ERQ accounts, alongside another $100 million in other foreign currencies.
Officials said the need for this measure has grown since the Bangladesh Bank discontinued its Tk5,000 crore pre-shipment refinance scheme in March this year. The fund, introduced during the pandemic, had provided exporters with crucial liquidity support.
