'Exchange rate volatility unlikely under free-floating regime'

The chance of any form of volatility in the exchange rate under the persisting free-floating regime is very thin because of the lower demand for foreign exchange, Country Manager of Mastercard Syed Mohammad Kamal said.

In an exclusive interview with The Financial Express (FE) recently, he expressed his thanks to Bangladesh Bank for allowing the exchange rate to be determined by the market. The exchange rate remains stable for the last several weeks following the central bank's decision to let the market determine the USD-Tk rate, he said.

"I believe the timing of introducing the market-based exchange rate is appropriate, as the supply of forex is much higher than the demand due to Eid-ul-Adha," he said.

Mastercard owns an international money transfer and cross-border payments company called Transfast, which accounts for nearly a quarter of the entire remittance that comes to Bangladesh through official channel.

The country head of the USA-based global technology company said the inflow of remittance keeps rising while the country's export grows steadily in recent times. On the other hand, he said, the demand for the foreign currencies is on the decline as the country has already cleared overdue external bills and ACU (Asian Clearing Union) payment in May.

"As the demand is low, the likelihood of an increase in exchange rate is minimal. We (money transfer entities) are rate-takers. We keep exchanging currencies at a rate that the market allows," he said. Mr. Kamal added that the exchange rate could rise to some extent once the demand rises, but the good thing is that Bangladesh Bank has maintained an intervention fund amounting to $500 million to tackle any potential unusual surge in the exchange rate.

Responding to a question over possible fear that aggregators like Transfast may create exchange rate volatility, he clarified that Mastercard/Transfast is a Money Transfer Organization and added that it is not possible to take control of the market by any vested interests if the rate remains stable at the banking end.

Though the global money transfer houses are commercial organisation, majority of suc.h entities are run by Bangladeshis. "So, we don't want to do anything that will stress our economy and we're very careful of it," he said.

About the digital payment, he said, cash still dominates transaction modes, but it is possible to create a less-cash society ridding on favourable policy support. Whenever someone goes to a shop to buy something, he said, the shopkeeper sometimes encourages the buyer to pay cash to avoid VAT. "These practice needs to be addressed through proper policy intervention," Mr. Kamal said.

He suggested that the government should offer some sorts of incentives for digital payment that will certainly discourage cash usage through ensuring traceability of the transactions. If consumers are allowed to buy something at reduced price through digital payments compared to the cash, it will boost usage of virtual transactions, according to him.

He said Mastercard keeps introducing cutting-age technology and innovation to make payment easier for their clients. Terming Bangladesh one of the emerging markets for the multinational financial service providing entities, Mr Kamal said they are continuously engaged in various initiatives like Tap & go, QR-based payment, remittance products and interoperability with mobile financial and wallet services using its digital cards.

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