BB dollar sales to govt banks rising to meet growing import costs

Dollar sales of the central bank to government banks are increasing to meet the country's import expenditure as the prices of different goods have increased in the international market.

People concerned said that the government's effort to import more essential commodities to meet the country's demand considering the global situation has also contributed to the Bangladesh Bank's dollar sales rise.

According to the Bangladesh Bank sources, on Thursday, it sold $107 million to various government banks. The amount was $68 million on Wednesday and $131 million on Monday.

After selling dollars on Thursday, the central bank's reserves stood at $34.25 billion.

Bangladesh Bank data shows, LC (letter of credit) opening for importing consumer goods and petroleum increased by 4.56% and 50.99% in the first three months (July to September) of the current fiscal than the same period of the previous year.

In July-September of FY23, the opening of LCs decreased by 8.57% for imports of capital machinery, intermediate goods and industrial raw materials.

But at the same time, LC settlements rose by 31.56% to $22.4 billion, on the back of higher payment for petroleum, capital machinery and industrial raw material imports ordered in the previous months.

Imports totalled $19.34 billion in the July-September period this year, which was $17.32 billion in the same period last year.

Ahsan H Mansur, executive director of the Policy Research Institute of Bangladesh, told The Business Standard, "The central bank has to sell dollars to import essential products in the country. However, if the outflow of dollars is more than the inflow, the amount of reserves will decrease."

"The central bank should take effective steps to increase remittances. The price of dollars should be coordinated with the open market to stop transactions via the hundi," he added.

The central bank has been selling the greenback from the reserve to stabilise the market. It sold $5.58 billion from the reserve in the four months of the current fiscal year, as the dollar sales from the reserve in FY22 totalled a record $7.67 billion.

The Bangladesh Bank in FY21 bought around $8 billion from banks due to low imports and high remittance inflows amid the pandemic.

At the beginning of the current fiscal year, remittance inflow provided a brief relief to the fast-depleting reserves. In the first two months of FY23, Bangladesh received more than $4 billion in remittances.

But the remittance flow stumbled subsequently following the uniform dollar rate in September. The country received $1.52 billion remittance in October, which is lowest in the past eight months.

Amid the ongoing dollar crisis, the country's exports have also been declining for the past two months. Exporters fetched the country $4.35 billion in October, which was 7.85% low year-on-year, according to the Export Promotion Bureau (EPB).