Ultimately Bangladesh courts uniform exchange rate of the US dollar in its latest bid for buttressing forex reserves and cooling persistent market volatility.
Officials said the regulator Sunday fixed unified buying and selling rates for the greenback, which ends trial and error with multiple rates in the wake of global financial crisis.
Bangladesh Foreign Exchange Dealers' Association (BAFEDA) issued a circular to this effect on the day, stating that it was "unanimously decided" in a joint meeting between BAFEDA and ABB (Association of Bankers' Bangladesh Limited) held on August 31, 2023 to implement uniform exchange-rate guidelines with effect from Sunday until issuance of further notice.
As per the decision of the joint meeting, all types inflows of foreign currencies (wage earners remittances, others inward remittances exports proceeds etc) to be brought by the banks at a fixed rate of Tk 109.50 per dollar and its equivalent rate for other foreign currencies (FCs).
In terms of outflows of foreign currencies, the circular says, import- bill settlement, outward remittances, credit card-payment settlement, student-file settlement etc to be sold by banks at a maximum rate of Tk 110 per dollar and its equivalent rate for other FCs.
The circular also states that inter-bank transactions of FCs should be done at a maximum rate of Tk 110 each dollar and its equivalent rate for other FCs.
Talking to the FE, managing director and chief executive officer of City Bank Limited Mashrur Arefin said the rate for purchasing all kinds of the US dollar has been fixed at Tk 109.50 while the selling rate at Tk 110.
"The spread is 50 basis points or 50 paisa," says Mr Arefin, also vice chairman of the ABB. He informed that the CAD or current-account deficit improves as the difference between the demand and supply of the greenback narrowed down significantly in recent months.
"So, I think, all the banks should follow the uniform rate. If we do so, we will be able to attract remittance in-between US$ 2.20 billion and $ 2.30 billion per month," he says.
Seeking anonymity, a top executive of a commercial bank said there are some banks who have not been following BAFEDA instructions regarding the exchange rate to gain more in this forex-starved time.
"I think they will do the same this time. So, the errant banks will get benefited while the economy will keep losing forex," he added.
When contacted, former lead economist at World Bank's Dhaka office Dr Zahid Hussain said with the latest decision, the economy comes out of the regime of multiple exchange rates.
"But, this is not a truly floating exchange rate because it is still fixed. I think the economy is in right direction but it is not enough to tackle the forex dearth," he says.
The eminent economist points out that the difference of rate between the formal and informal channels is still very high, which needs to be reduced. "Otherwise, nothing will work out."
Seeking anonymity, a BB official said the central bank allowed a purely floating exchange-rate regime on September 12th last year. But the banks were seen engaged in race of giving various rates to get more FCs that caused the volatility on the forex market.
"That's why the BB went back to the managed floating exchange rate in just a week. So, the BB's experience of pure floating market is not good," the official said.
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