As the country’s foreign exchange market is facing turmoil due to surging dollar demand, Bangladesh Bank has come up to identify key causes and implement corrective measures, according to officials.
To stabilise the situation, they said, Bangladesh Bank has taken the following steps:
Exchange Rate Cap:
The bank has set a maximum exchange rate of Tk 123 per dollar for remittance collection. For cross-currency transactions, the calculated rate cannot exceed this limit.
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Data Monitoring System:
A dashboard has been implemented to monitor market data closely, ensuring greater transparency and control.
The central bank’s measures aim to alleviate the current crisis and restore stability to the dollar market.
According to the officials, the central bank attributed the ongoing dollar market volatility to several interconnected factors.
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The central bank says one major cause is the increased demand for dollars at the end of the financial year. December often sees a spike in loan repayments and other financial obligations, creating added pressure on the foreign exchange market.
Compounding this is the central bank’s recent suspension of dollar sales to meet IMF-mandated targets. This decision has restricted the supply of dollars in the interbank market, further widening the gap between demand and supply.
Besides, Bangladesh’s downgraded credit rating has disrupted correspondent relationships with foreign banks. This has made it more challenging to issue UPAS (Usance Payable at Sight) letters of credit, defer payment maturities, and maintain the inflow of offshore banking loans.
The situation has been aggravated by a directive from Bangladesh Bank mandating the repayment of foreign debts by December, adding additional pressure to the market.
Another significant factor is the role of aggregators and intermediaries in remittance collection. Their monopolistic practices have destabilised exchange rates, contributing to the ongoing turmoil.
A mismatch in dollar inflows and outflows by commercial banks has further complicated the situation, exacerbating instability in the dollar market.