Steady devaluation of Taka as pressure on forex reserve mounts
Friday, 6 May 2011
Siddique Islam
The slowed-down remittance growth and higher import bills have built up pressure on foreign exchange reserve, leading to a steady devaluation of Bangladesh Taka (BDT) against the US dollar. Foreign exchange reserve has been facing pressure mainly due to lower inflow of remittance and higher import payments, particularly for fuel oils, food grains and power plant equipment. "The country's foreign exchange reserve is now under pressure. It may intensify in the near future, as import payments for food grains, power plant equipment and petroleum products are increasing," a senior official of the Bangladesh Bank (BB) told the FE Thursday. The country's overall imports grew by nearly 42 per cent in the first nine months of this fiscal, thanks to a jump by 122 per cent in import of food grains, officials said. Letters of credit (LCs) against imports worth US$ 23.507 billion were settled during the July-March period of fiscal 2010-11 (FY11), compared to $16.588 billion during the corresponding period of the last fiscal, according to the central bank statistics. The BB official said the central bank has been providing foreign currency support to the commercial banks to settle import payment bills for the essential items that have been exerting pressure on the forex reserve. As part of the operation, the central bank sold US$10 million at market rate to a state-owned commercial bank (SCB) directly Thursday to meet the growing demand for the greenback. The US dollar was quoted at Tk 73.10-Tk 73.15 in the inter-bank foreign exchange market on the day against Tk 73.05 -Tk 73.10 of the previous working day, market operators said. The country's foreign exchange reserve came down to US$ 10.40 billion Thursday from $10.417 billion of the previous working day after selling of the $10 million to the SCB. Last Wednesday, the foreign currency reserve dropped to $10.417 billion from $11.370 billion of the previous working day after making a routine payment worth $986 million to the Asian Clearing Union (ACU) against imports during the March-April period of this calendar year. "Such foreign currency support to the banks will continue in line with the demand in the market," another BB official said, adding that the central bank is monitoring the overall market situation closely. The central bank has so far pumped in $878 million directly to the commercial banks to meet such higher demand for the greenback in FY11, the BB officials said. "We want to minimise mismatch between demand for, and supply of, foreign exchange in the market through providing such supports to the banks," the central bank official added. Bankers, however, said deposit growth in the banking system may decline due to lower inflow of remittance in the month of April. The Bangladeshi nationals working abroad sent US$976.14 million in April 2011, recording a fall of $126.84 million from the level of the previous month. In March, the remittance stood at $1.103 billion, the BB data showed. "Slowed-down remittance flow will adversely impact the inflow of foreign currency to the market," a senior treasury official of a leading private commercial bank said.
The slowed-down remittance growth and higher import bills have built up pressure on foreign exchange reserve, leading to a steady devaluation of Bangladesh Taka (BDT) against the US dollar. Foreign exchange reserve has been facing pressure mainly due to lower inflow of remittance and higher import payments, particularly for fuel oils, food grains and power plant equipment. "The country's foreign exchange reserve is now under pressure. It may intensify in the near future, as import payments for food grains, power plant equipment and petroleum products are increasing," a senior official of the Bangladesh Bank (BB) told the FE Thursday. The country's overall imports grew by nearly 42 per cent in the first nine months of this fiscal, thanks to a jump by 122 per cent in import of food grains, officials said. Letters of credit (LCs) against imports worth US$ 23.507 billion were settled during the July-March period of fiscal 2010-11 (FY11), compared to $16.588 billion during the corresponding period of the last fiscal, according to the central bank statistics. The BB official said the central bank has been providing foreign currency support to the commercial banks to settle import payment bills for the essential items that have been exerting pressure on the forex reserve. As part of the operation, the central bank sold US$10 million at market rate to a state-owned commercial bank (SCB) directly Thursday to meet the growing demand for the greenback. The US dollar was quoted at Tk 73.10-Tk 73.15 in the inter-bank foreign exchange market on the day against Tk 73.05 -Tk 73.10 of the previous working day, market operators said. The country's foreign exchange reserve came down to US$ 10.40 billion Thursday from $10.417 billion of the previous working day after selling of the $10 million to the SCB. Last Wednesday, the foreign currency reserve dropped to $10.417 billion from $11.370 billion of the previous working day after making a routine payment worth $986 million to the Asian Clearing Union (ACU) against imports during the March-April period of this calendar year. "Such foreign currency support to the banks will continue in line with the demand in the market," another BB official said, adding that the central bank is monitoring the overall market situation closely. The central bank has so far pumped in $878 million directly to the commercial banks to meet such higher demand for the greenback in FY11, the BB officials said. "We want to minimise mismatch between demand for, and supply of, foreign exchange in the market through providing such supports to the banks," the central bank official added. Bankers, however, said deposit growth in the banking system may decline due to lower inflow of remittance in the month of April. The Bangladeshi nationals working abroad sent US$976.14 million in April 2011, recording a fall of $126.84 million from the level of the previous month. In March, the remittance stood at $1.103 billion, the BB data showed. "Slowed-down remittance flow will adversely impact the inflow of foreign currency to the market," a senior treasury official of a leading private commercial bank said.