Foreign exchange facilities for residents

Recently, the central bank allowed release of foreign currency up to US$5,000 for individual traveller while going abroad under different quotas. Previously, it was up to US$3000. Despite the raise, Bangladesh nationals need to follow some set rules to get foreign exchange facilities as per the Guidelines for Foreign Exchange Transactions-2009. Presently, it is very difficult to enjoy foreign exchange facilities by residents in Bangladesh due to imposition of various rules and regulations by regulators.
The Bangladesh Bank can liberalise the foreign exchange facilities for individuals through relaxation of certain rules and regulations. It can allow a certain amount of foreign currency holding by individual residents for a financial year. Individual residents in Bangladesh may be allowed to maintain foreign currency account in any scheduled banks in Bangladesh up to a certain amount for a financial year. The amount of foreign currency can be used for any valid purpose regardless of any rules and regulations.  
One of the officials of the Bangladesh Bank said, "Liberalisation in foreign currency holding by individual residents will help increase availability of foreign currency within the country and will keep the foreign currency market vibrant as well". Moreover, it may reflect positively in the overall economy of the country, in the following manner:
1. As individuals will be allowed to maintain foreign currency account, bank's foreign currency holding will increase which will smoothen the treasury management function of a bank and UPAS (usance payable at sight) L/C payment will be possible without having buyers' credit from foreign financial institutions.
2. The bargaining power of local banks will increase in respect of interest rate for borrowing foreign currency from foreign financial institutions.
3. Dependence on international financial institutions will be reduced for low-cost foreign currency borrowing.  
4. Local banks will be able to make foreign payments from their own foreign currency holding as part of their treasury management functions.
5. As Bangladesh is an export-oriented country, depreciation of local currency is likely. If local currency appreciates, foreign currency holding by individuals will increase and subsequently local currency will begin to depreciate due to increase in buying of foreign currency by individuals. As we are highly dependent on export earnings, preventing taka appreciation is important to attract foreign buyers.
6. On the other hand, if local currency begins to depreciate beyond tolerance level, individuals will have the tendency to realise some exchange gain by selling their foreign currency holding which will again help appreciate local currency. As a result, automatic stabilisation of exchange rate will be possible without intervention from the central bank.
7. Due to availability of foreign currency in personal bank account, individuals will have access to international market through online or some other means to fulfill their needs which will create consumer satisfaction.
8. Performance of local banks will improve on investment of foreign currency deposits by individuals and consequently will have a positive credit growth.
But before initiating foreign currency facilities for residents in such a way, there should have some specific process or system to ensure that no individual is allowed more than his entitled amount of foreign currency in a financial year.   
The writer is SEO Bank Asia Limited, MCB Dilkusha Branch.
 arshed_69@yahoo.com