Bangladesh Bank says it ‘intervened’ in dollar market to shore up reserves

The central bank says it took the decision as remittance inflows are good and there isn’t any additional pressure on foreign loan payments

Bangladesh Bank (BB) has explained why it has re-entered the dollar market after a month and a half, saying that it "intervened" in the foreign exchange market to increase reserves amid an easing of pressure in paying foreign liabilities and an increase in remittance flow.

On Apr 15, the central bank bought $70 million from a private Islamic bank at a rate of Tk 122.75. The next day, it bought $50 million from four more banks at the same rate.

On both days, the interbank exchange rate for the dollar was TK 122.70.

Explaining the move, Bangladesh Bank spokesperson and Executive Director Arif Hossain Khan told bdnews24.com on Monday that the central bank had stayed out of the foreign exchange market for some time because of pressure from the government’s foreign payments and other private external obligations.

"However, as the pressure on those payments has eased recently and remittance flows have increased significantly, Bangladesh Bank intervened through the existing auction system to increase reserves," he said.

"On the 15th of April, an auction notice was sent to banks to purchase US $70 million according to the rules. Four banks bid at the auction. Since only Islamic Bank sent in a bid within the cut-off rate, US $70 million was purchased from that bank."

Earlier, on Mar 2, the central bank had bought dollars at Tk 122.30. Since then, the taka has depreciated against the dollar by Tk 0.45 in the past one and a half months.

On Apr 8, BB had said in a statement that the import and foreign debt situation was “normal”.

Import expenditure and foreign debt repayment are proceeding on a regular and planned basis and there is no pressure to devalue the taka, it said.