BB resumes dollar sale to offset strain on market

Poor remittance inflow reverses forex trend

SIDDIQUE ISLAM | Monday, 30 March 2020

The central bank has resumed sale of the US dollar (US$) to banks directly for offsetting extra pressure on the market, caused by lower remittance inflow following the ongoing coronavirus outbreak.

As part of the move, the Bangladesh Bank (BB) sold US$40 million to three commercial banks on Wednesday to settle their import payment obligations, particularly for liquefied natural gas (LNG), after more than one month's interval, according to officials.

"We've sold the foreign exchange to both public and private commercial banks to help settle their import payment obligations," a senior official of the BB told the FE on Sunday.

Such foreign currency support to banks may continue in line with market requirements, the central banker hinted.

"We're closely monitoring the market to avert any unfavourable situation in the near future," he added.

The country's foreign exchange market witnessed a reverse trend just within 10 days, mainly due to lower inflow of remittance, according to senior treasury officials of commercial banks.

They also said most of the banks were in a selling mode from March 09 to March 16 mainly due to lower import payment pressure on the economy.

A total of $305 million were sold by the banks concerned to the central bank during the period, following higher inflow of foreign exchange than the outflow.

The supply side of the foreign currency improved until third week of this month, as the export growth dropped more than the import growth in the recent months, they added.

The export growth fell by 5.31 per cent to $22.36 billion in the July-January period of the current fiscal year (FY), 2019-20, from $23.61 billion in the same period of FY 19. On the other hand, import growth dropped by 4.43 per cent to $32.00 billion from $33.49 billion.

"But the market situation reversed last week following lower remittance inflow due to spread of the coronavirus outbreak across the world," the treasury head of a leading private commercial bank (PCB) explained.

"Such lower inflow of remittance has created an extra pressure on the market," he noted.

Bangladesh received $1.18 billion remittance from March 01 to March 24. It was $1.45 billion in February 2020, another official said.

Talking to the FE, the treasury head of another PCB said cancellation of export orders along with lower inflow of remittance pushed up demand for the greenback in the market last week. "Such pressure on the market may increase in the coming days, if the central bank does not take the issue seriously," he opined.

The central bank has so far sold $529 million in FY 20 to the banks, particularly the public sector ones, to meet the growing demand for the US currency in the market. Earlier, the BB sold $22 million to the banks on February 13.

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