Banking card also holes in forex reserves

Foreign-currency transactions using cards has recorded a phenomenal rise in recent months, adding pressure to depleting foreign-exchange reserves, sources said.
Such a spurt in foreign-currency transactions by banking card raises curiosity among some analysts and economists who smell fund flight this way, apart from permissible card transactions.
According to the central bank, Bangladeshis transacted Tk 7.69 billion worth of foreign currency through their cards from their bank accounts in a single month of July.
Two years ago in July 2021, they had spent only Tk1.18 billion in foreign currency using the plastic mainly in overseas payments, BB data showed. However, foreign visits by individuals almost nil at that time because of Covid-19 pandemic.
Amid foreign-exchange shortage, the higher transactions have created an additional pressure on Bangladesh's reserves, bankers and analysts said Wednesday.
The country's foreign-exchange reserves dived to US$23.255 billion in August, which is equivalent to nearly four months' import payments, BB officials said.
Higher dollar rate on the open market than in commercial banks, rising foreign trips, small official import payments and worldwide rising inflation are the reasons behind the ballooning foreign-currency transactions.
A senior official of the central bank says since Bangladesh has been struggling to buttress foreign-exchange reserves over the last one year, they are trying to keep the import payments under control by cutting luxury goods imports.
"But we cannot control the transaction by card as a person can bring or pay US$12,000 per year for his overseas trips, payments or buying goods," he adds.
The government is also discouraging its employees from making unnecessary foreign trips.
However, the central banker mentions, rich-and middle-income people are still making frequent foreign trips.
Eastern Bank Managing Director and CEO Ali Reza Iftekhar told the FE that huge outflows of medical tourists to India, Thailand and Singapore in recent months have widened the foreign- currency transactions.
"Besides, migration of Bangladeshi students to North American countries, including the USA and Canada, in recent months has grown which also prompted foreign-currency expenditure by card for overseas payments," he says.
Mr Iftekhar notes that the number of cardholders is also increasing at his bank where the dual-currency card is also growing.
Centre for Policy Dialogue (CPD) Research Director Dr Khandker Golam Moazzem sees the massive transaction increase within two years as unusual amid the dearth of the global reserve currency--the US dollar--in the country.
"It is true that there is natural increase in the transactions due to higher tourist outflow, migration of students, treatment overseas and for business. But the central bank should oversee whether the commercial banks are allowing those foreign transactions properly," he says.
As the country is facing the reserves crisis, the USD appreciated against local currency and there is higher rate on the open market, there might remain a scope for laundering the greenback even by credit card, Mr Moazzem told the FE about the dollar dilemmas.
According to the central bank, the number of cardholders and transacted foreign currency also increased a lot in July this year compared to the previous months.
In July-the first month of this fiscal--some 965,243 foreign-currency transactions by card took place, the BB data showed.
In July 2022, the number of transactions by card was 614,700 while it was only 277,880 in July 2021.

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