Despite record remittance inflows, the price of the US dollar remains high. The value of the dollar is still over the top in the kerb market. The price has risen further over the past week.
In some places in the kerb market, the exchange rate stands at Tk 129 per dollar. Although remittance flows have increased, banks are unable to meet the excessive demand.
Recently, Bangladesh Bank published a circular allowing the market to set the dollar price from January 1. According to this decision, banks and customers will negotiate to determine the price of the dollar. Before setting the price, banks will discuss it with their dealers or branches registered for foreign exchange. Based on this, the dollar price will be decided.
Despite these measures, the exchange rate has not toned down. Dollars are now being traded uncontrollably in the kerb market. Businesses need to buy dollars from the kerb market to open Letters of Credits (LCs). As a result, banks are also buying dollars from the kerb market.
The dollar was decided to be sold at Tk 122 on the interbank platform, though it was Tk 120. Recently, the number of LCs for importing various food items soared ahead of Ramadan, raising the demand for dollars in the market.
It is unfeasible to meet the excessive demand relying solely on remittance inflows with dwindling earnings from the export industry. Therefore, the dollar price has inflated, according to industry insiders.
According to Bangladesh Bank sources, the country set a record for the highest monthly remittance inflow in December last year. Remittances worth $2.64 billion (2,639 million) were earned, amounting to approximately Tk 33,000 crore at the exchange rate of Tk 122 per dollar.
According to Bangladesh Bank data, the remittance inflow was $648 million higher than in the same period last year, which was $1.99 billion in December 2023.
This is the highest amount of remittance ever received in a single month. The previous record was in July 2020 during the pandemic when $2.59 billion was received.
Last year, except for July, all other months of the year saw remittance inflows exceeding $2 billion.
Even after the record remittance inflows, the dollar price has not been controlled. Banks raised the prices for both buying and selling the US currency. Now, banks will sell dollars to customers for a maximum of Tk 122 per dollar for imports, paying off overdue loans, and other purposes.
Almost all banks sold the dollar at Tk 122 last week. On January 1, the maximum price was Tk 120. The dollar price was raised by Tk 2 on the first day of the new year.
Earlier, the central bank set the maximum purchase price for remittances at Tk 123. Therefore, the exchange rate was Tk 124 per dollar for imports. Banks that are buying remittances at higher prices are still selling dollars for imports at those elevated prices.
The boost in the exchange rate at the banks also caused a rise in exchange rates at money exchange companies. These companies can now sell the dollar for up to Tk 123.
However, in the kerb market, the price rose to Tk 128, and last Thursday, the foreign currency was seen being sold for as high as Tk 129.
When asked, Mutual Trust Bank Managing Director Syed Mahbubur Rahman told Bangladesh Pratidin that the hike in the exchange rate is likely due to higher demand. There is no crisis in the bank’s internal transactions, which is a positive sign.
He said that most of the banks have a supply of dollars. The central bank is buying dollars instead of selling them, which is increasing reserves. Banks are not imposing extra charges for LCs, which is good progress. If the kerb market rate remains high, it will likely decrease soon.
Translated & edited by Fariha Nowshin Chinika
