Bangladesh caps dollar exchange rate for remittance at Tk 108, export proceeds at Tk 99

Foreign currency dealers and banks have finally capped the dollar exchange rates following Bangladesh Bank’s instructions amid currency volatility.

The rate for inward remittances will be Tk 108 or below and Tk 99 for export proceeds, effective from Monday. The average of the two rates will set the ceiling for letters of credit for import.

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.

He said the rate may change anytime in line with the international market.

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.