Banks are finally allowed to maintain accounts in Chinese Yuan (CNY) with their correspondents or overseas branches for cross-border transactions executed in Bangladesh, amid dollar crunch.
The Bangladesh Bank (BB) issued Thursday a notification to this effect, asking all the authorised dealers (ADs) for foreign exchange in Bangladesh to follow the switch.
"To bring wider scope, it has been decided that ADs (authorized dealers) may maintain accounts in CNY with their correspondents/ branches abroad for settlement of cross-border transactions executed in this currency," the central bank says in its notification.
Talking to the FE, a senior BB official said the measure may help reduce dependence on the US dollar in Bangladesh, as the country struggles to tackle price rises of the US currency and fall of foreign-exchange reserves amid surging global inflation.
"It will also facilitate Bangladesh's foreign trade covering both export and import," the central banker explains the contingency measure, which, incidentally, follows recent indications from government's high-ups.
Earlier on August 14, 2018, the central bank allowed the AD banks to open foreign-currency clearing account with the BB in the CNY on the same grounds.
The banks had earlier been allowed maintaining foreign-currency clearing accounts with the central bank in the US dollar, Pound Sterling, Euro, the Japanese Yen and the Canadian dollar, Australian dollar and Swiss Franc.
"Local importers may purchase goods at cheaper prices from China using such payments mechanism," another BB official said while replying to a query.
Under the latest BB policy, the importers from Bangladesh are allowed to settle their import-payment obligations with all convertible currencies, including the Chinese one--also named Renminbi (RMB)--the central banker added.
He noted that the International Monetary Fund (IMF) had already included the Chinese currency in its currency basket - SDR (special drawing rights).
The value of SDR is based on the exchange rates of five major currencies - the US dollar, Euro, Yuan, Japanese Yen, and British Pound Sterling, according to the central banker.
Earlier, the Metropolitan Chamber of Commerce and Industry, Dhaka (MCCI) had suggested the central bank consider using a second currency, other than the US dollar, for foreign trade.
The MCCI placed the suggestion when a delegation of the trade body, headed by its President Md. Saiful Islam, called on BB Governor Abdur Rouf Talukder at his office in the capital on July 27.
The MCCI named Chinese currency as the second international currency, as Bangladesh imports most from China, which emerges as the country's largest trade partner. "In particular, reference was made towards using the Chinese RMB as the second currency for international trading, especially for importing raw materials from China," the trade body said in a press statement. Syed Mahbubur Rahman, managing director (MD) and chief executive officer (CEO) of Mutual Trust Bank Limited, welcomed the latest BB move, saying that "it will help boost foreign trade".
Reports, meanwhile, say China has introduced cross-border interbank payments system (CIPS) with the RMB as an alternative trading currency.
This payment system offers clearing and settlement services for its participants in cross-border RMB payments and trade.
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