As the holding of foreign exchange continues rising significantly in recent days, Bangladesh Bank (BB) Thursday introduced currency-swap arrangement through which the commercial banks can sell and buy their foreign currencies for a certain period of time.
The banking industry has been facing various problems like LC (letter of credit) opening because of the shortfall of the foreign currencies, particularly the American greenback, for months.
Even starting from this calendar year, the NOP in the banking sector was found negative or short positioning. But things started improving from the middle of January.
According to statistics available with Bangladesh Bank, the NOP was $40 million negative on January 1st, 2024. The following day, the deficit in forex positioning went past $100 million.
Since then, the stock of the greenback in banks has kept improving towards positive territory, reaching $410 million in positive strand on February 14, the data showed.
Officials and bankers say the increased inflow of remittance and export receipts coupled with a remarkable improvement in current account in recent months helped the banks turn the corner.
Contacted for the central bank's view, BB spokesperson Md Mezbaul Haque said banks having higher foreign-currency-payment obligations than the forex earnings are in the category of short positioning while those having more supply than the payment requirements are categorised in long positioning.
"The NOP in banks turns positive now, which means the banks have more forex than the demand at the moment--a good sign for the economy," says the central banker while explaining the financial jargons.
Responding to a question, the spokesperson for the regulator said the banks invested a significant part of their local-currency stock to purchase the greenback from remitters and exporters in recent days and it further intensified the persisting liquidity tightness.
With the currency swap arrangement in place the banks now can overcome the liquidity stress through keeping their overbought forex with the central bank for a short period of time.
"And they (banks) can get their forex back again by paying the interest rate differential between 3-month term of SOFR rate and policy rate. So this is a good option for the banks in the current context," Mr Haque added.
Talking to the FE writer, managing director and chief executive officer of Jamuna Bank Mirza Elias Uddin Ahmed said the gap between demand and supply of the foreign currencies in the banks lessened significantly in recent times. "And the rising trend in supply continuous."
Alongside increased inward flow of remittance and export receipts, the top executive of the commercial bank said, the country's current-account position turned positive while import costs globally were going down in recent days. And it is positively reflected in the NOP scenario.
"I think we're slowly overcoming the burden of forex dearth."
Appreciating the currency-swap mechanism as a move well in time, the experienced banker hopes it will help bring stability in both liquidity and their prices on the market.
According to the BB data, the country recorded a $1.93 billion worth of surplus in July-December 2023. Such a surplus indicates the country is net lender to the rest of the world and it helps raise the net foreign asset.
Imports dropped nearly 20 per cent to $30.5 billion during the July-December period, following tightfisted spending meant for navigating crisis time.
On the other hand, the country posted the highest single-month merchandise exports worth $5.72 billion in January. Apart from the hope-raising export performance, remittance marked a significant rebound with $2.1 billion netted in January-also happens to be the highest since June last year.
Respite from crunch comes with banks' forex repletion
Currency swap new nudge, amid export-remittance rebound
JUBAIR HASAN | Published: February 16, 2024 23:30:07
Respite from crunch comes with banks' forex repletion
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