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Should Bangladesh go for alternative currencies?
SOHEL PARVEZ and AKM ZAMIR UDDIN
The US dollar is currently one of the most talked about issues.
This is because the American greenback, which had been stable against the Bangladeshi taka for several years, has become dearer from the initial months of 2022.
The demand for US dollars has surged to clear mounting import bills, which are much higher than the country’s combined earnings through exports and remittances.
This has sent the currency to cross the psychological threshold of Tk 100 for importers last month, up from Tk 90 earlier this year.
The rally has continued even though the Bangladesh Bank took a number of measures, including the pumping of $7.6 billion in the fiscal year of 2021-22 to cool off the foreign exchange market and more than $1 billion since July, and tightened imports of non-essential goods.
Yesterday, importers had to settle payments by buying a dollar at as high as Tk 111.
As the volatility in the forex market persists, leading chambers such as the Metropolitan Chamber of Commerce and Industry have urged the central bank to allow multiple currencies, including the Chinese renminbi, for international trade settlements to cut Bangladesh’s over-reliance on the US dollar.
The suggestion has evoked debates.
Bankers and economists have described the idea as good in principle but added that the use of other currencies for global trade can be only on a limited scale, but not at this difficult time when the global currency market is volatile.
As per Bangladesh Bank rules, banks are allowed to maintain foreign currency clearing accounts with the central bank in the US dollar, the pound sterling, the euro, the Japanese yen, the Canadian dollar, and the Chinese renminbi.
This means businesses can already carry out international trade transactions by using the currencies along with the US dollar. But a majority of local exporters show reluctance in settling their global trade using currencies other than the US dollar.
Of Bangladesh’s total trade of more than $130 billion, as much as 99 per cent takes place through the American greenback.
In Bangladesh, local exporters have to import raw materials to manufacture exported-oriented items. The import payments are settled by the US dollar gained from their export earnings.
“If they use two separate currencies to settle international trade transactions, businesses may face losses in some cases due to the exchange rate risk,” said a central banker.
He reasons that it would be difficult for businesses to carry out trade in the Chinese currency as the trade gap with the world’s second-biggest economy is wide, with the balance tilting towards Beijing.
Besides, the central banker says, Chinese exporters usually don’t show a willingness to receive payments in their own currency.
“This is because many of them have businesses in a number of countries where the US dollar is essential to run their operations smoothly.”
In principle, the idea of using multiple foreign currencies for international transactions and reducing the dependence on a single currency is fine, said Atiur Rahman, a former governor of the Bangladesh Bank.

Countries in trade with Russia without dollar
AHSAN HABIB
The emerging multi-polar world is now trying to reduce the use of the greenback in their trade after the US and EU imposed multilateral sanctions on Russia.
The US, European Union, Canada, Japan, Switzerland and the UK have imposed economic sanctions on Russia since it invaded Ukraine in February.
In March, the US and the EU cut off Russian banks from SWIFT, the global financial artery that allows the rapid transfer of money across borders.
Against this perspective, Russia invited several countries to conduct trade using their own currencies shunning the SWIFT and Bangladesh got the invitation too.
Meanwhile, efforts of Russia and China to pursue non-dollar transactions are a part of a broader de-risking strategy gaining popularity among several emerging markets, according to a Bloomberg report.
Russian coal and oil paid for in yuan is about to start flowing into China as the two countries are trying to maintain their trade amid the growing international outrage over the invasion of Ukraine.
Several Chinese firms used the local currency to buy Russian coal in March. These will be the first commodity shipments paid for in yuan since the US and Europe penalised Russia and cut several of its banks off from the international financial system.
Meanwhile, Saudi Arabia plans to trade some oil in the yuan, while India is exploring a rupee-rouble payment structure, the report says.
Our New Delhi correspondent Pallab Bhattacharya reports that the Reserve Bank of India (RBI) allowed the country’s cross-border trade in Indian rupee on July 11 this year.
The RBI has set up a new, additional template for invoicing, payment, and settlement of exports and imports in the Indian rupee.
Banks will require prior approval from the Foreign Exchange Department of the RBI for transactions under the new arrangement.
Iran announced on July 26 that the US dollar had been officially ditched in the country’s trade relations with Russia while the greenback was replaced with the Russian rouble. The west Asian country also has a plan to trade in that way with Turkey, China and India.
Russia trading in other currencies is very common. In 2019, Russia moved to euros for oil supplies to China National Petroleum Corporation (CNPC) under long-term contracts.
Now, however, the oil exports to the CNPC will be fully paid in Chinese yuan amid the sanctions from the EU.
Reuters reported recently that trading firms used by state-controlled Rosneft, a Russian oil company, for supplies to Indian refiners started asking for the dollar equivalent in dirhams this month as its government officials decided the country did not need large sums of the Indian currency for external trade.
The BRICS countries, a group of major emerging economies comprising Brazil, Russia, India, China and South Africa, are also in a discussion for expanding national currency settlements and lending to counter the weaponisation of the dollar by the US, according to a Global Times report.

BB gives banks another $40m
AKIM ZAMIR UDDIN
Bangladesh Bank yesterday injected $40 million into banks operating in the country in a bid to ensure stability in the local foreign exchange market.
With this move, the central bank has injected about $1,200 million into the market in the last 34 days. It had supplied a record $7.62 billion in the last fiscal year to reduce the depreciation of the taka against the US greenback.
Md Serajul Islam, spokesperson of Bangladesh Bank, said the central bank took this decision as a part of its efforts to calm the market down.
The exchange rate of the taka stood at Tk 94.70 per dollar in the interbank platform in contrast to Tk 84.80 a year ago.
A managing director of a bank, on condition of anonymity, said the interbank exchange rate does not reflect the actual scenario of the market as many banks are now selling greenbacks quoting up to Tk 110.
As per banking norms, banks are allowed to sell dollars to importers by adding a maximum of Tk 1 to the interbank rate, he said.
This means importers are supposed to spend a maximum of $95.70 per dollar to settle their import bills.
He said the central bank has kept the exchange rate of the interbank high artificially by giving verbal instructions to banks.
The lower rate in the interbank platform than the actual one followed by the market has discouraged banks not to sell and buy any dollars among each other.
With this backdrop, the interbank platform has turned inoperative, which has fuelled volatility further in the foreign exchange market, the managing director said.