NEWS media reported that Bangladesh Bank has continued its practice of injecting dollars into the market this fiscal year to cool down exchange rate volatility, with $62 million being pumped in just the first 17 days of the month. In fiscal 2017-18 the Central Bank injected $2.31 billion — the highest since fiscal 2009-10 — but the move did not yield the desired result thanks to higher import payments against lower export earnings. Failing to check the capital flight in terms of over-invoicing, the Central Bank’s policy to inject dollars aiming at market stability has brought no fruit, and will not.
The Association of Bankers has recently urged the Central Bank to inject more greenbacks into the market to address the shortage of the currency. Import payments have significantly increased in recent months and the latest trend in opening Letters of Credit indicates that it would shoot up further. The reason being, the country has started to import liquefied natural gas to enable the plants to run uninterruptedly at full steam. The price of petroleum products in the global market has also maintained an upward trend, which will pile on more pressure. The banks should take a cautious policy while importing goods to thwart any attempts of over-invoicing.
Bangladesh’s current account deficit is on course to cross the $10 billion mark in fiscal 2017-18 for the first time in history. Between July last year and May this year, the current account deficit stood at $9.37 billion in contrast to $2.21 billion in the negative a year earlier. Export earnings and remittance inflows grew 7.79 percent and 17.09 percent respectively in the first 11 months of the last fiscal year, but they were inadequate to counteract the current account imbalance.
As the country’s current account is already facing huge deficits for the higher import payments, the government should take initiatives to increase the remittance flow to cool down the existing situation of the foreign exchange market. The government should take immediate measures to increase export earnings and remittances to ease the pressure on the exchange rate.
The Association of Bankers has recently urged the Central Bank to inject more greenbacks into the market to address the shortage of the currency. Import payments have significantly increased in recent months and the latest trend in opening Letters of Credit indicates that it would shoot up further. The reason being, the country has started to import liquefied natural gas to enable the plants to run uninterruptedly at full steam. The price of petroleum products in the global market has also maintained an upward trend, which will pile on more pressure. The banks should take a cautious policy while importing goods to thwart any attempts of over-invoicing.
Bangladesh’s current account deficit is on course to cross the $10 billion mark in fiscal 2017-18 for the first time in history. Between July last year and May this year, the current account deficit stood at $9.37 billion in contrast to $2.21 billion in the negative a year earlier. Export earnings and remittance inflows grew 7.79 percent and 17.09 percent respectively in the first 11 months of the last fiscal year, but they were inadequate to counteract the current account imbalance.
As the country’s current account is already facing huge deficits for the higher import payments, the government should take initiatives to increase the remittance flow to cool down the existing situation of the foreign exchange market. The government should take immediate measures to increase export earnings and remittances to ease the pressure on the exchange rate.
