Bangladesh raises dollar price for export proceeds, lowers it for remittances

The foreign exchange dealers say they raised the rate for export proceeds as the pressure created by imports has eased slightly

The foreign exchange dealers and banks have raised the exchange rate of the US dollar for export proceeds by Tk 0.5 to Tk 99.5 on exporters’ demand, but lowered it for inward remittances to Tk 107 from Tk 107.5.

Afzal Karim, managing director of Sonali Bank and chairman of Bangladesh Foreign Exchange Dealers Association, announced the new rates after a meeting with the Association of Bankers, Bangladesh on Sunday.

He said they raised the rate for export proceeds as the pressure created by imports has eased slightly.

The new rate for export proceeds will become effective on Monday while the price of the dollar for remittances will take effect on Nov 1.

For importers, the dollar rate to open letters of credit will be Tk 1 more than the weighted average of the rates fixed for export proceeds and remittances.

The dollar began climbing in mid-2021 due to a supply crunch of the currency. The crisis went deeper towards March this year, prompting the central bank to come up with several measures to curb the dollar’s unprecedented gains.

In a meeting in May, the BAFEDA and ABB agreed to fix a ceiling to set a uniform interbank dollar exchange rate to ease the situation.

On Jun 30, Bangladesh Bank reintroduced the floating rate and regularly devalued the taka against the dollar while selling large amounts of the currency to meet the demands.

The banks were supposed to hold discussions to propose a dollar exchange rate under the supervision of the central bank.

However, BAFEDA did not follow up on some decisions after forwarding a proposal at the end of May. As the dollar crisis deepened, the banks halted dollar transactions to make an extra profit and the interbank dollar market lost activity.

The banks in crisis bought dollars from other banks at higher prices to settle import payments, while sometimes looking to clients to come up with the currency. This put the customers at the receiving end of the crisis.

The dollar reached an all-time high of Tk 121 in the open market in August and is currently being sold at around Tk 110. The price of the dollar in the banks rose to Tk 107, although Bangladesh Bank was selling at Tk 95.

The central bank capped the gap between dollar buying and selling rates at Tk 1 for the banks

in a meeting with the foreign exchange dealers and bankers on Aug 14.