-Dollar price rose to Tk 124-125
-Tk 5-6 increased in just two days
-Central Bank raids the money exchanges
After nearly two months of stability, the dollar market turned volatile again amid ongoing unrest student protests across the country. In the open market or money exchange, the dollar rose by Tk 5-6 in just two days to Tk 124-125 yesterday.
Besides, Bangladesh Bank has started operations in various money exchanges from last Tuesday to control open market rates. Two weeks ago it sold at Tk 118-119 per dollar. A group of expats started a campaign to send remittances through informal channels (hundi) instead of banking channels to protest the government crackdown on students during the agitation. In order to prevent the growth of the hundi in this situation, last Sunday, Bangladesh Bank verbally ordered the banks to increase the exchange rate of the US dollar sent through official channels. As a result, banks are also buying remittances at higher rates.
Currency, traders said that recently many expatriates are selling the dollars they brought with them in the market. However, in the current situation, the supply of dollars has decreased due to fewer people coming from abroad. This led to a shortage of the dollar, which in turn increased its value.
Policy Research Institute (PRI) executive director Dr Ahsan H Mansur said the ongoing volatility has left the dollar market volatile. None of us know when this unrest will stop. The price of the dollar is expected to rise further. As a result, the economy may fall into extreme crisis.
South Asian Network on Economic Modeling (SANEM) research director Professor Sayema Haque Bidisha said, “There is a need for a sustainable solution to bring in remittances. Currently trying to bring in some money through artificial incentives is undertaken. But how long will it last? As long as there is a difference between the government dollar rate and the open market rate, this problem will continue. If the rate is high in the curb market, expatriates will send money through informal channels. Therefore alternative strategies to increase remittances need to be considered.”
She recommends introducing remittance cards and giving some benefits to those who send large amounts of remittances. Efforts should be made to encourage expatriates to send remittances through legal channels.
The government imposed a curfew from the night of July 19 to control the nationwide situation surrounding the students' quota reform movement. As a result, banks remained closed till 22 July. Online banking transactions were also stopped due to lack of internet connectivity. After several days of suspended transactions, banking services resumed on a limited basis on July 24, with many banks unable to conduct foreign transactions due to slow internet. On July 24-25, the transaction was conducted for only four hours from 11 am to 3 pm. From Sunday to Tuesday this past week, Bangladesh Bank has directed banks to keep their branches open from 10 am to 3 pm, according to government office hours.
Money exchange houses in various places including Dilkusha and Gulshan are taking dollars. The dollar is selling higher due to fears of a raid and tight supply. Somewhere it is being sold at Tk 124-125 per dollar. People, including students and medical candidates, are desperately looking for dollars in various jobs. However, dollars are not available at the required level. Two weeks ago, the dollar traded between Tk 118-119 in the open market. The cash dollar price has been stable at this rate for several months.
Money Changers Association President MS Zaman said, We are always committed to comply with the Central Bank's directives. On Wednesday, I visited various money exchanges and found that they were selling dollars at the fixed rate, at Tk 119. Open market dollar seller Lokman Hossain said that the price of dollars has increased due to reduced supply.
To restore stability in the foreign exchange market, the dollar appreciated by Tk 7. On May 8, a "crawling peg" was introduced, fixing the intermediate rate to the dollar at Tk 117, up from Tk 110 earlier. As a result, the dollar rate remained stable at Tk 117-118 and remittance flows were increasing. However, due to the ongoing situation, new uncertainty has arisen regarding remittances.
Remittances into the country have dropped significantly in the last week. Between July 21 and 27, expatriate income came in at just $138 million. Banks were closed from July 19 to 23 due to public holidays. Apart from this, there was no broadband internet service for five consecutive days and no mobile internet service for ten days. Additionally, a curfew is in force from July 19 night.
According to Bangladesh Bank's latest data, $400-500 million was received in remittances sent by expatriate Bangladeshis in the first three weeks of July. Of this, remittances totaled $1.429 billion between July 1 and 20 and $1.567 billion as of July 27. Remittances received $2.25 billion in May and $2.54 billion in June after the appreciation of the dollar.
Small banks are in trouble. To boost remittance flows, Bangladesh Bank last Sunday verbally instructed some banks to offer higher exchange rates for the US dollar through official channels. As a result, some banks are buying dollars by increasing the remittance rate by Tk 120. This shows unhealthy competition in the banking sector as some banks, especially the big ones, are offering higher dollar rates for remittances while the smaller ones are at a disadvantage.
Banks are not selling many dollars to people other than their regular customers. The dollar trade is now said to be monopolized by only four to five large private banks. State-owned banks mostly use dollars for government imports, but the government does not pay more than the official rate. Hence, these banks are unable to buy dollars at a higher rate than private banks.
ZH
