China has proposed the use of its currency yuan in place of the US dollar for loans to Bangladesh, citing unstable exchange rates of the greenback.
Chinese Ambassador Yao Wen revealed the proposal, which he said had earlier been sent to the government, when a journalist asked for his comment on a fall in the rate of clearing loan tranches this fiscal year after the envoy’s meeting with Planning Minister Abdus Salam on Tuesday.
The financial and monetary policy of the US has caused unstable dollar rates worldwide, creating problems for China and other countries in transactions in the American currency, Yao said.
China is eager to solve the problem and transactions in the Chinese currency can be the solution, per the ambassador.
China has approved $361.7 million in loans to Bangladesh in the first half of the ongoing 2023-2024 fiscal year until December, according to the Economic Relations Division.
The loans approved by China throughout 2022-2023 fiscal year totalled over $1.12 billion.
The Bangladesh Bank last week approved the inclusion of the yuan in the Real Time Gross Settlement System to ease trade transactions with China, starting on Feb 4.
The US dollar, euro, Japanese yen, UK pound sterling and Canadian dollar are the other foreign currencies on the system.
The central bank had allowed the opening of clearing accounts for easy trade transactions in yuan with China in 2018.
Discussions on the currency’s inclusion in the RTGS gained pace after Bangladesh’s dollar reserves started depleting at an alarming rate when economic activities returned to normalcy following the coronavirus pandemic.
The dwindling foreign currency reserves prompted the government to take a series of measures to save dollars, including tight control on imports of luxury products,
Yao said he discussed cooperation on implementing Bangladesh’s five-year plans, which are similar to those of China, in the meeting with the planning minister.
Like the Planning Commission of Bangladesh, China has the National Development and Reform Commission, the ambassador said.
Salam said they discussed settlement of the bilateral issues, along with ways to share experiences of implementing the five-year plans.