March 1, 2024, 4:29 pm

Mousumi Islam

2023-11-27 14:51:28 BdST

Dollar crisis persists as supply remains low

Despite various measures taken by the authorities, the country’s business continues to suffer from a persistent dollar crisis, which keeps the consumer market unstable.

The prices of imported goods have increased as the greenback remains costlier while a large number of importers are unable to open letters of credit (LCs) due to the dearth of the US currency at banks.

Traders are protesting and exchanging words with bankers, but dollars are not available at the fixed price.

The Association of Bankers, Bangladesh (ABB) and the Bangladesh Foreign Exchange Dealers Association (BAFEDA) announced a new dollar rate on Wednesday.

Under this new step, the purchasing rate for export proceeds and remittance was lowered to Tk110 from Tk110.50 while the selling rate for import settlements was set at Tk110.50, down from Tk111.

But the market remains volatile. A day after the new rate on Thursday, the currency was not traded at the announced rate. Instead, the dollar price surged compared to the previous day.

The same picture was seen on Sunday as well. Banks purchased dollars sent as remittance from the foreign exchange houses at Tk122-123. It appears that, in practice, banks are not adhering to the fixed rate set by ABB and BAFEDA.

But according to the decision of the banks, the price of the dollar coming from expatriates should be Tk110. Apart from this, the price stands at Tk115.5 with a total 5% incentive given by the government and the banks.

As the dollar rate is high for remittance, banks are charging a higher price to meet import liabilities. They are charging around Tk122 per dollar, which is Tk12 more than the rate fixed for this purpose. This negatively impacts the market by increasing the cost of imports and subsequently the price of consumer goods.

Because of the dollar crunch, people are forced to pay much higher than the official rates and many banks are turning down the importers who seek to open LCs.

Policy Research Institute (PRI) Executive Director Dr Ahsan H Mansur said transactions in the forex market are not taking place at the unified rates.

“It appears that an unofficial market has been created among the banks, and the difference between the kerb market and unofficial rate in the inter-bank exchanges is lower and the gap in exchange rate between official rates and kerb market is higher,” he said.

Dr Mansur alleged that banks are preparing wrong data about dollars and as a result, financial sector data is being corrupted too, which is unacceptable.

Businessmen are unable to open LCs

Due to lack of dollars, banks refuse to open LCs not only for luxury goods but for essential goods also. From industrial raw materials to essential goods, imports are being denied.

Rizwan Rahman, former president of Dhaka Chamber of Commerce and Industry (DCCI), said that currently businessmen are roaming around the streets to buy dollars.

He said, “The banks have no dollars. The large importers need Tk10-100 crore in dollars per year to open LCs. How do they open LCs now?”

According to the instructions of the Bangladesh Bank, the banks are not able to pay for dollars even though 100% of the money has been paid in imports.

To counter the dollar crisis, the central bank has imposed various restrictions to discourage imports of non-essential goods.

However, even in non-luxury products, 100% margin is being kept. As a result, they are forced to collect raw materials from the open market at high prices and try to keep the factory running.

Businessmen say that those who do not earn in dollars are also unable to open LCs now. Among them, the industries that produce products to meet the domestic demand are also not able to open LCs.

The official LC rate on paper is Tk111 per dollar, but banks receive Tk13-14 additionally from the importers, unofficially.

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