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Official dollar exchange rate differs far from actual price

A leading business firm in the country paid an import bill of USD 400,000 to a bank last week. They paid a total of Tk 44 million at the official rate of Tk 110 per USD.

Dollar
DollarFile photo

 

However, they had to pay an additional Tk 13 per dollar through pay order. In total, they paid Tk 5.2 million Tk through pay order. As such, the business firm had to pay Tk 123 per dollar. Although the official price of USD is Tk 110 in all banks, the actual price is much higher than that.

Most of the import agencies are experiencing the same predicament. While some influential business persons are buying dollars at a comparatively low price from the bank, the common people have to purchase dollars at a price higher than the declared rate to clear the import debt

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In the same way, when the common traders are struggling to open letter of credit (LC), big and influential persons are getting benefits from banks.

The importers are purchasing dollars at a rate of Tk 12 to Tk 13 higher than the official rate at the same time when the two organisations of bankers have lowered the price of dollars in phases. Although the rate of dollars fell in pen and paper as a result of their declaration, dollars are not available at such a price in reality.

Prothom Alo spoke to several business persons in the last few days to understand the actual situation regarding the supply and demand of dollars.

Speaking on condition of anonymity, they said they are facing more hurdles for opening LCs than any time before. Besides, dollars are not available at the declared price. So they have no other way than buying dollars at a higher price. The additional price is being paid in different ways.

Meanwhile, additional dollars have to be added to the reserve within this month as per the condition of the International Monetary Fund (IMF). According to that condition imposed by the IMF, the neat reserve should stand at USD 17.78 billion at least by the end of this month. The current neat reserve is a little higher than 16 billion.

In this situation, the Bangladesh Bank (BB) has curtailed the supply of dollars in the market. In addition, the central bank has reduced the size of the export development fund to USD 3.1 billion from USD 7 billion. According to reliable sources in the central bank, the BB is planning to reach the desired reserve by purchasing dollars from commercial banks on the last day of December.

Asked about how much of the dollar crisis in the market has been sorted out, Mutual Trust Bank managing director Syed Mahbubur Rahman told Prothom Alo that the crisis is not over yet. However, he refused to speak any further regarding this.

However, the chief executive of a leading bank in the country told Prothom Alo on condition of anonymity that those who have power are purchasing dollars at a higher price ignoring the instructions of the central bank. These people are also paying higher to clear the import bills. The influential banks are doing more business now.

Exporters under pressure too

There are cases where the importers had to pay as much as Tk 128 per dollar. Sources in the banking sector say some shariah-based banks are directly taking this additional money while others are collecting it through pay order.

Prothom Alo has seen the documents of banks taking additional prices for dollars.

Speaking to Prothom Alo, Sadid Jamil, managing director of Metal, a leading importer and distributor of agricultural equipment in the country, said, “It’s the harvesting season and the demand for tractors and harvesters is high at the moment. However, we cannot open LCs as per the demands due to the dollar crisis. Even if we succeed in opening a LC, we have to pay an additional Tk 12 to Tk 13 per dollar. However, the banks are not opening any LC at all this month.”

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Apart from the importers, the exporters are also under pressure as the banks are selling the dollars from their export income to others. Later, the exporters had to purchase dollars at a higher price to import the raw materials.

Speaking regarding this to Prothom Alo, Bangladesh Knitwear Manufacturers and Exporters Association executive president Mohammad Hatem said, “The more power you have, the lower the price dollars for you. The banks are taking from Tk 115 to Tk 128 per dollar in case of import. The banks are selling the dollars from our export income to others. And later, it is us who has to pay an extra price for the dollars that we brought. The banks have created syndicates in the dollar market. We will not bear any responsibility for the damage done to the exporting agencies as a result of these syndicates.

The banks are not following the dollar rate fixed by the two organisations of the bankers. Economists have long been saying to leave the dollar exchange rate on the market. The IMF delegation has also stressed on adopting a flexible dollar exchange rate. However, the central banks are interested in leaving the dollar exchange rate on the market.

Policy Research Institute’s executive director Ahsan H Mansur told Prothom Alo, “The difference between the official and market price of dollars is further intensifying the crisis. If that difference was between one or two taka, then it wouldn’t matter. The problem is the gap between the official and market price of dollars is too much now. It has an adverse impact at consumer level. The official price should be close to the market price. Dollars should be sold from the reserve at the market price.”

Challenge of increasing reserves

Forex reserves rose a little upon getting the installments of the loans from the IMF and Asian Development Bank (ADB). Bangladesh received the second loan installment of USD 689.8 from the IMF and USD 400 million of the ADB loan. After that the gross reserve rose to USD 26.05 billion. However, Bangladesh’s reserve now stands at USD 20.68 billion as per BPM-6 calculating method of the IMF. The net reserve at the moment is little above USD 16 billion.

The central bank officials say more money from foreign loans will be added to the reserves in the last few days of the month. In addition, the BB will purchase dollars from the commercial banks to increase the reserve. The central bank will try utmost to meet the goal set by the IMF. The BB earlier failed to fulfill the IMF condition of maintaining the reserve.

The country received a total of Tk 1.57 billion in remittance in the first 22 days this month. Besides, LCs of a total of USD 3.20 billion have opened in the first 18 days of the month.

Speaking to Prothom Alo, treasury heads of three banks said some banks have stopped buying remittance after the government became strict about purchasing expatriate income at higher prices. Although a little portion of the total remittance received by the country was purchased at the official rate, some of the shariah-based and conventional banks are purchasing remittance at a higher price.

Bangladesh has gained the confidence of the foreign banks’ after receiving the second installment of the IMF loan. It will help get a high ceiling of loans from these banks.

Speaking regarding fulfilling the IMF condition of maintaining the reserve, Policy Research Institute executive director Ahsan H Mansur told Prothom Alo, “We must meet the condition at any cost. We have several options to meet the condition, including foreign loans or purchasing dollars from commercial banks. The international agency will take it positively if the IMF stands with Bangladesh, which would help us end the crisis.”

*This report appeared on the print and online versions of Prothom Alo and has been rewritten in English by Ashish Basu

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