Disciplining errant forex dealers
In a bid to tame the volatile foreign exchange market, the Bangladesh Bank (BB) has reportedly begun taking action against money changers found involved in profiting illegally through manipulating dollar price in the open market. Reports further have it that in the BB's drive so far, licences of five foreign exchange dealers have been suspended, nine agencies have been shut down while other 42 agencies have been served with show cause notices for violating rules guiding trade in foreign exchange. The dealers in foreign exchange, whose licences have been suspended are learnt to have been holding unauthorised amounts of both foreign currency (dollars, to be precise), as well as local currency (taka).
Notably, a forex dealer can hold at the most US$25,000 at the close of each business day. Any cash beyond this limit has to be deposited in the foreign currency account held with the respective forex dealer's bank. Also, the balance of the account cannot be more than US$50,000 at any point of time. But many of those errant forex dealers had violated the rule to the detriment of the stability of the foreign exchange market. It is worth noting that this latest move by the central bank to combat delinquency in the forex trading has come in the wake of the measures it (BB) adopted earlier to restrict the import of unnecessary and luxury commodities together with the government restriction on needless foreign tours by government officials. Also, with a view to controlling government procurements, implementation of less important projects has also been suspended. Unsurprisingly, the central bank has now come down hard on the foreign currency dealers following last week's jumpy foreign exchange market when the US dollar's price rose to Tk112, the highest ever against taka.
Illegal hoarding of dollars to create artificial crisis is definitely a factor behind the unstable foreign exchange market. So, a strict regulatory supervision of the money changers has been a long time coming. According to reports, there are as many as 235 officially recognised forex dealers in the country. But some reports say that around 600 money changers exist across the country, many of whom are operating illegally. In this situation, the ongoing drive should continue to root out the illegal operators and make the rest accountable to the authority. But the money changers are not the only ones who are manipulating the forex market. There are also other players. The BB's inspection teams have reportedly found that some private banks were holding foreign currencies beyond their allowed limit. Some banks, on the other hand, were found to have been dealing in foreign currencies at higher rates, while others were taking extra time to adjust currencies entering the banking channels from the export market, the report further went.
Small wonder that an artificial dollar crisis was created whereby more profit could be made by the financial institutions in question. With the measures taken so far, the government may be able to plug the holes through which precious foreign currencies earned from migrant workers' remittance and export are going out of the country. To this end, the government will be required to further broaden the scope of its operation to arrest the depletion of the country's forex reserve.