HM Murtuza | New Age Jul 08,2020
BB officials said that the central bank had purchased greenbacks worth around $870 million from the banking system in the outgoing fiscal year 2019-2020 as the banking system was flooding with excess dollars due mainly to a huge inflow of remittance and an import slump.
Due to the situation, the country’s foreign exchange reserve has been growing rapidly with the volume reaching record $36.01 billion on July 2 after hitting the $34-billion and $35-billion marks on June 3 and on June 24 respectively.
To keep the exchange rate of the dollar stable, there was no other option for the central bank but to purchase the dollars from the local market, said BB officials.
On the other hand, the central bank also injected $835 million into the banking sector mostly before the pandemic began in the country in March.
In the first eight months (July-February) of the just concluded fiscal year 2019-2020, the BB injected $489 million into the banking system when the country was free from coronavirus.
The data showed that the BB pulled Tk 4,151.61 crore from the banking sector before the outbreak of coronavirus and another Tk 2,937.54 crore during the coronavirus outbreak.
From March to June, the central bank’s net local currency injection into the banking sector stood at Tk 4,448.76 crore given the BB’s injection of Tk 7,386 crore during March-June period of FY20.
Policy Research Institute executive director Ahsan H Mansur told New Age, ‘It’s a win-win situation for the central bank as well as for the other banks.’
‘Injection of local currency into the banking system would boost the banks’ capacity to lend money and also prevent appreciation of the taka against the dollar,’ Ahsan said.
The BB should build up reserve by $1.5 billion a month by way of purchasing dollars and take it to $42 billion by the end of this year, he said.
An increased reserve would help gain foreign investors’ confidence while considering the country as an investment destination, said Ahsan, also the chairman of BRAC Bank.
The banking sector has been going through tough time as collection of deposits from the borrowers has fallen drastically due mainly to the policy relaxation introduced by the central bank to give borrowers some relief amid the pandemic.
The banks have been asked not to downgrade any loans for the borrowers’ failure to repay loans until September 30 this year.
Apart from the injection of Tk 7,386 crore, the central bank has planned to inject Tk 50,742 crore in the banking system, mostly in the form of refinance, against the implementation of the government-announced stimulus packages worth around Tk 1.03 lakh crore.
Before resuming purchase of the US dollar from the banking sector on March 8 this year, the central bank for the last time purchased the dollars from the local market on January 4, 2017 and since then it had been injecting the US dollars in the local market.
The central bank sold $2.34 billion in FY19.
With the increase in US dollar supply in the country’s banking system, the inter-bank exchange rate of the greenbacks has started fluctuating to a small extent.
The interbank exchange rate of the dollar was Tk 84.95 in March but it dropped to Tk 84.8 on June 23. On July 2, the exchange rate increased a bit to Tk 84.9.