Bangladesh: Central bank buys 5.15b in FY14 to check taka appreciation

Dhaka, July 7, 2014 (New Age): Bangladesh Bank purchased a record amount of dollars — worth $5.15 billion — from the scheduled banks in the just concluded financial year 2013-14 with the aim of curbing depreciation of the greenback against the local currency taka, BB officials said. They said the central bank was compelled to buy huge amount of greenbacks from the local banks in the last two financial years due to sluggish business amid political uncertainty and it failed to sell any dollar in the period. The BB purchased dollars worth $9.68 billion between the FY13 and the FY14 as it had bought greenbacks worth $4.53 billion in the FY13. According to the central bank record, the BB bought the highest amount of dollars in the just concluded financial year since the FY 2004-2005. It is not possible to collect the data before the FY 2004-05 as the information is not available in the BB record book. The BB data showed that the central bank had purchased dollars worth $157 million in the FY 2011-12, worth $316.50 million in the FY 2010-11 and worth $2.16 billion in the FY 2009-10. A BB official told New Age that the central bank had purchased the greenbacks from the local banks continuously to protect the interests of exporters and expatriate Bangladeshis by keeping stable the exchange rate of the taka against the dollar. The dollar became stable at around Tk 77.75 to Tk 77.63 between May 2013 and June 2014 after the BB had bought huge amount of foreign exchange in the last few financial years. Due to the dollar purchasing spree by the BB, the country’s foreign exchange reserve increased significantly in the last two years. The reserves crossed $15-billion mark on May 7, 2013, $16-billion mark on August 13, $17-billion mark on October 22, $18-billion mark on December 19, $19-billion mark on February 19, 2014, $20-billion mark on April 10 and $21-billion mark in June this year. The BB official said higher export earnings against lower import payment and a stable trend in inward remittance had contributed to increase in supply of foreign exchange in the market during the last two financial years. The BB also took the measure to purchase dollar in a bid to curb the inflationary pressure by mopping up the dollars from the market and it is providing treasury bonds and treasury bills to the scheduled banks against the dollars’ worth instead of cash liquidity, said the BB official. Another BB official said that record in foreign currency reserves indicated the slower economic activities and lower GDP growth in the country. Entrepreneurs did not go for much import of goods and capital machinery due to slower economic activities and fall in domestic demand due to political uncertainty in the country that resulted in bigger reserves of foreign currency, he said. The reserves may increase further in the coming months, if the central bank continues to purchase dollars from the banks, he said. The government should take steps to improve the investment situation in the country so that the excess dollar could be invested in the productive sector, he added.