The Bangladesh Bank (BB) has depreciated the inter-bank exchange rate by Tk 0.25 to Tk 86.70 per US dollar. The currency devaluation resulted in importers buying the greenback at as high as Tk 95 to pay import bills on May 9. Bankers are reportedly blaming the rising import payments for the ongoing volatility in the foreign exchange regime.

The country’s central bank has depreciated the local currency on a regular basis in recent months to contain imports. But economists have urged the central bank to weaken the taka at a faster pace, according to Bangladeshi media reports.

The Bangladesh Bank (BB) has depreciated the inter-bank exchange rate by Tk 0.25 to Tk 86.70 per US dollar. The currency devaluation resulted in importers buying the greenback at as high as Tk 95 to pay import bills on May 9. Bankers are reportedly blaming the rising import payments for the ongoing volatility in the foreign exchange regime.

The central bank devalued the local currency by Tk 0.20 to Tk 86.45 a dollar on April 28. The inter-bank exchange rate stood at Tk 84.80 on May 9 last year.

The country’s import payments increased by 44 per cent year on year to $61.5 billion in the first nine months of the current fiscal. Exports grew by 33 per cent to $36.6 billion during the period.

The trade deficit rocketed to an all-time high of $24.90 billion between July and March.

The central bank is also injecting greenbacks into the market at a large volume to support banks so that they can settle import payments smoothly. Despite selling around $5 billion this fiscal so far, it has failed to keep the foreign exchange market stable.

The central bank bought a record volume of US dollars, amounting to $7.93 billion, from local banks in the last fiscal when imports plummeted amid the pandemic. This boosted the country’s foreign exchange reserves, which stood at more than $48 billion in August last year.

But the higher-than-expected import payments are now squeezing the reserves as it fell to $44 billion on April 30.

The reserves will fall further as the country is scheduled to make import payments to the Asian Clearing Union (ACU), an arrangement by which participating countries settle payments for intra-regional transactions.

Bangladesh, Bhutan, India, Iran, Maldives, Myanmar, Nepal, Pakistan and Sri Lanka are members of the Tehran-headquartered ACU, which was established in 1974.

Fibre2Fashion News Desk (DS)