Dollar passes Tk 100-mark
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“It’s difficult to predict how the market will behave in the coming days. We don’t know when the market will become stable as it is facing a shortage of the dollar,” he said.
The BB has taken a number of measures to restore stability in the market but it will take time to reap benefits from the initiatives, he said.
Emranul Huq, managing director of Dhaka Bank, said some exporters didn’t bring their export proceeds over the last few days due to the post Eid-hangover.
“…Besides, the central bank had earlier given deferral support to exporters to repay foreign loans because of the pandemic. Now the exporters are paying back the loans upon the expiry of the provision… This has created an extra pressure on the forex market.”
He said the market might be under stress in the next couple of months owing to the global situation.
MORE MEASURES NEEDED
Ahsan H Mansur, executive director of the Policy Research Institute of Bangladesh, said the BB didn’t take proper policy measures to tackle the ongoing instability.
“We have to contain the credit demand from the private sector at any cost, as the situation is worsening.”
The BB should withdraw the interest rate cap on lending and hike the policy rate further to help reduce the supply of money to the market, he said.
The policy rate has been hiked twice within a month for the first time since it was introduced in 2003. The BB raised it by 25 basis points on May 29 and by 50 basis points on June 30 this year. The rate now stands at 5.50 percent.
The policy rate is a pivotal benchmark interest rate that commercial banks follow for fixing interest rates on both loans and deposits. A spike in policy rates makes loans more costly.
Ahsan also suggested that the government reduce subsidies in fiscal 2022-23 to bring back stability in the macro economy.
“The suggestions are very painful, but the government should do it in the interest of the economy.”
It’s necessary to ease the pressure of balance of payments to shore up the foreign exchange reserves, he said.
Between July and May in the last fiscal year, imports went up by 39 percent year-on-year to $75.40 billion, while exports grew 33 percent to $44.58 billion.
This resulted in a record trade deficit -- the gap between exports and imports -- of $30.81 billion, up 48.8 percent year-on-year.
The country’s foreign exchange reserves yesterday stood at $39.70 billion in contrast to $46.15 billion in December last year.
Zahid Hussain, former lead economist at the World Bank’s Dhaka office, advised that the BB should let the foreign exchange market run its own course.
If the central bank intervenes in the market on a regular basis, the actual situation will not be visible, he said.
The reserves are now eroding, creating high exchange rate expectations among exporters. And many of them are now thinking that they will enjoy high exchange rates against the dollar if they bring the greenback later, he pointed out.
“This will worsen the ongoing crisis. Ensuring a floating exchange rate will help avert the situation,” Zahid said, adding that the lending rate cap should be withdrawn as well.
BB’S STANCE
Contacted, BB Spokesperson Md Serajul Islam said the central bank is now making all-out efforts to keep the market stable.
It’s now injecting dollars into the market on a regular basis, but banks should do more to address the issue, he said.
Banks should bring exports proceeds on time and take more initiatives to boost remittance, he added.