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Commerce, Home ministries coordinating govt's tough stance on price gouging ahead of Ramadan
This year's Ramadan is still a couple of days away, but a segment of traders already appears eager to increase profit margins by raising the prices of different commodities.
The government of Bangladesh however claims to be on to them, and has taken various initiatives to keep the market stable during the holy month.
Prime Minister Sheikh Hasina has directed officials to increase surveillance across the country so that dishonest businessmen cannot make excessive profits. She particularly instructed the field-level administration to be on alert. The Commerce Ministry has said it will keep an eye on the traders so they cannot destabilize the market by creating any artificial crisis.
Even detectives from the law enforcement agencies under the Home Ministry have been instructed to keep their eyes open so that unscrupulous syndicates do not create an artificial crisis in Ramadan.
Read: Dates, fruits to be more costly during Ramadan due to LC opening crisis
In the past, it was noticed that traders increased the prices of goods several times before the start of market supervision ahead of Ramadan. Just before Ramadan, the demand for items like edible oil, sugar, pulses, chickpeas, spices, and so on increases. Traders take this opportunity and raise the prices of in-demand items. It is no different this time.
“Ramadan is a few days away. Like last year, I have bought sugar, pulses, and chickpeas at a much higher price. Every year the same thing happens. There is also an upswing in the vegetable market,” Wahid Fakir, a resident of Bhatara New Market, told UNB.
The prices of sugar, oil, ginger, onion, and other essential goods have all increased in the last week. Vegetables, fish, and meat prices are also going up. Although there is also no shortage of edible oil in the market, daily essentials are selling at an increased price rate every week.
"This year we are already on alert from before. No one will be spared, if there is an artificial crisis in the market. We, the local administration, including the law enforcement agencies, and consumer rights protection directorate, will continue to monitor the market with mobile courts,” Commerce Minister Tipu Munshi told UNB.
Read: People forced to return home with bags half full due to higher prices of chicken, meat, fish
“As preparation for Ramadan, I have had meetings with businessmen one to two months ago. That's when we asked them to increase imports. In particular, instructions have been given so that the banks open the LCs quickly for the import of food products,” he said.
“The government has taken all kinds of necessary initiatives to keep the prices of goods under control during Ramadan. We have warned the traders about the preparations in advance this year. Controlling commodity prices was a challenging affair at this time of global crisis and rise in dollar rate,” he also said.
“Despite this, dollars have been provided for import of all food products commonly used in Ramadan. Besides, the ministry has requested the NBR to reduce the duty and VAT to reduce the prices of commodities like sugar and edible oil,” said the minister. “In addition, we are taking several other programmes to control the prices of goods during Ramadan. Apart from the family card allocated for 1 crore families, sugar and chickpeas will be sold in truck-sales in Dhaka and divisional cities. NBR has also extended the time for import of rice by three more months."
“Hopefully, the prices of goods will be stable during Ramadan. The government's preparation in this regard is good enough,” added Tipu Munshi.
Read More: Have enough stock, no scope of price hike during Ramadan: Tipu
Asked about the role of law enforcement agencies in keeping the market stable during Ramadan, Home Minister Asaduzzaman Khan said, "The law enforcement agencies have been instructed to prevent the rise in the prices of goods.”
“Detectives have already been instructed to keep an eye so that unscrupulous syndicates do not create any artificial crisis around Ramadan and make the market unstable. Several strict steps have been taken, including conducting mobile courts, to control the prices of consumer goods by suppressing syndicates,” he said.
“Various strategies are being formulated to prevent artificial crises in the market and to take action against those who stockpile goods. Along with the police, the law enforcement agencies and consumer rights department, including RAB, will be active in the field, the intelligence surveillance will also be increased,” he also said.
Cabinet Secretary Mahbub Hossain said, “If there is an abnormal situation in the market, we can enforce the law. Every deputy commissioner has been told about this. They will monitor it very strictly. We will also monitor from here.”
Read More: Make marginal profit in Ramadan, Munshi urges businessmen
Bangladesh received $1.96 billion in remittances in January amid dollar crisis
The inward remittance flow in January came as good news while Bangladesh Bank (BB) is struggling with LCs liabilities to import essential commodities and industrial raw materials amid volatile foreign exchange supply.
In January, Bangladesh received $1.96 billion in the legal channel, the BB updated data revealed on Wednesday. In December, the remittance was $1.69 billion.
Bangladesh received $12.45 billion inward remittances in seven months (July-January) in the current fiscal year 2022-23.
Read More: Banks to stop charging any fees for handling remittances.
Bank officials said many import payments are being deferred due to the dollar crisis. For this, expatriate income of dollars are being bought at a higher price than the fixed price.
As a result, expatriate income increased. If the price limit of the dollar is removed, the crisis will go away, they said.
The BB spokesperson Mesbaul Haque told UNB that in order to increase remittance inflow, the central bank has increased the exchange rate of US dollars for remittance.
Read more: Bangladesh Bank simplifies receiving remittance
In addition to a 2.5 percent hassle-free incentive for remittance, several banks also provide additional incentives to attract foreign exchange, he said.
Banks will not cut any charge or fee for sending remittances in the legal channel, he said.
Research by Bangladesh Bank found that more than 40 percent of remittance of expatriate income is sent to the country through hundi.
Read More: Bangladesh 9th in remittances with US$ 15.9b: World Bank.
Crisis over LC opening will be normal soon, BB Governor tells DCCI
The leaders of Dhaka Chamber of Commerce and Industry (DCCI) urged Bangladesh Bank (BB) to supply adequate foreign currency in the settlement of LCs for an uninterrupted supply of essential commodities during the month of Ramadan.
The demand came from a meeting with Bangladesh Bank Governor Abdur Rouf Talukder while the newly elected Board of Directors of the DCCI made a courtesy call at his office on Wednesday. DCCI President Md Sameer Sattar led the team when they discussed various issues including the dollar crisis and smooth supply of essentials in the market.
The DCCI leaders told the Governor that public-private partnership is very important to tackle economic challenges.
In addition to this, Bangladesh Bank also needs to aim to assist commercial banks in providing sufficient foreign exchange for the settlement of the LCs to keep the uninterrupted supply of essentials during Ramadan.
The DCCI team also suggested ensuring good governance in controlling Non-Performing Loans by taking necessary reforms in the Banking Act, considering strict actions of loan recovery from the willful defaulters.
Read more: LC margin lowered to ensure stable supply of commodities in Ramadan
Governor Abdur Rauf Talukder said that the economy is currently facing three major challenges- the Russia-Ukraine war, an interest rate hike by the Federal Reserve Bank in the United States and the Covid-19 situation worsening in China.
He said that despite these challenges Bangladesh’s economy has remained quite stable.
He also indicated that the current situation of the LC opening will be normal within the next one or two months.
The central bank is working tirelessly to take several policy steps, including minimising the LC margin to ensure an uninterrupted supply of essentials during the upcoming Ramadan, the Governor said.
DCCI Senior Vice President SM Golam Faruk Alamgir Arman, Vice President Md. Junaed Ibna Ali and other members of the Board of Directors were also present at the meeting.
Read more: Rice, wheat import: Bangladesh Bank asks banks to keep minimum LC margin
Minimum or zero LC margin for imports of daily commodities for Ramadan, says Tipu Munshi
Minimum LC margin or LC zero margin has been allowed for importing essential commodities to meet consumption demands for next Ramadan, said Commerce Minister Tipu Munshi on Wednesday.
But because of LC opening other businesses will not suffer, he said.
Later, buyers can pay the dues of the commodities after 6 months as per the rules, he added.
“Dollars are being supplied as per the market situation in terms of imports. However, for remittance payment the amount is not given less,” he said.
The minister said the prices of pulses, oil and sugar, which need to be imported, have increased slightly following increase in the global market.
Read more: E-commerce has a billion-dollar prospect in Bangladesh: Tipu Munshi
But the prices of agricultural products in the country are low and may stay stable for the next two to three months, he added.
He said the prices of imported goods have increased because of higher dollar rates. In line with the dollar rates the prices of those goods are being fixed. That’s why the inflation remained under control compared with other countries, he said.
The minister said that the purchasing power of the people is limited. So, as long as it is necessary, one crore families will be provided with essential commodities at subsidized prices through TCB (Trading Corporation of Bangladesh).
He said that Prime Minister Sheikh Hasina has asked all to be economic to check the cost of imports. About 40 percent electricity consumption of the country has been reduced through special initiatives.
Currently, the difference between the import and export volume has narrowed. Dollars are being saved by reducing imports of luxury goods.
On Tuesday, Bangladesh Bank has allowed 8 essential commodities “usance term” (credit for suppliers/buyers) to meet consumption demands for next Ramadan.
Read more: LCs under scanner to check money laundering: Tipu Munshi
The foreign exchange policy department of Bangladesh Bank on Tuesday issued a circular on 90-day credit facility for suppliers/buyers of these commodities with immediate effect. This facility will remain applicable for the initiation of imports till March 31, 2023.
Traders got the opportunity to import edible oil, chickpeas, pulses, peas, onions, spices, sugar, and dates under 90 days of suppliers'/buyers' credit.
Rice, wheat import: Bangladesh Bank asks banks to keep minimum LC margin
Bangladesh Bank has instructed banks to keep a minimum LC margin (cash advance) for importing rice and wheat, in order to keep their market prices at a tolerable level.
Banking regulation and policy department of Bangladesh Bank issued a circular in this regard – with immediate effect – today and sent it to top executives of all banks.
Read more: Bangladesh Bank allows LCs to import commodities for Ramadan
The circular instructed that banks should kept LC margin at the minimum level, depending on the bank-client relationship.
“Rice, wheat and crops prices are seeing an upward trend, owing to the disruption in the global supply chain caused by the Russia-Ukraine war. As a result, the transport cost of global commodities has gone up, affecting prices in the local market,” the central bank circular added.
Read more: Bangladesh wants to buy sugar, wheat, soybean oil from Brazil
To keep the import and supply channel smooth for rice and wheat, Bangladesh Bank asked banks to keep a minimum LC margin.
The central bank also directed banks to take a minimum cash advance from importers while opening LCs for a number of essential commodities in order to keep their prices at a tolerable level during Ramadan.
The demand for edible oil, lentils, onion, spices and dates usually goes up during Ramadan. As a result, the prices of the items also increase.
BB struggles with dollar demand as LCs worth $ 68.36 billion open in 9 months
Bangladesh Bank (BB) is struggling to meet growing demand for the US dollar amid a sharp rise in post- pandemic economic activities.
The number of credit bonds or LCs for importing goods is increasing unusually. In the first nine months of the current FY 22 (July-March), traders have opened LCs worth $ 68.36 billion, up by 46.04 per cent than the same period of FY 21.
The value of the LCs stood at Tk5.89 trillion (Tk 1 lakh crore=1 trillion) which is close to the national budget of FY 22.
Economists say import spending has put pressure on foreign exchange. In this situation, economic experts have suggested curbing imports.
Every day, the central bank supplies US dollars to banks to meet the huge import demand for the domestic markets. The global price hike of commodities, edible oil and fossil fuel also pushed up dollar demand as payment volume increased for the same volume of goods as earlier.
On May 5, the BB paid $2.24 billion to Asian Clearing Union (ACU) as import payment for March-April, which is the highest ever. Similarly, import of goods, raw materials and capital machinery has increased from other countries.
The banks are selling greenback at Tk86 per dollar while it is selling over Tk 92 in the kerb market, which is the highest ever.
Dr Salehuddin Ahmed, former governor of BB told UNB that despite rise in dollar earning from exports and remittances, the cost of imports is higher than that.
Also read: Why Bangladesh Inc is wary of a sturdy dollar
The pressure on the US dollar has increased due to the growing demand of domestic imports, while Bangladesh is also importing to export, he said.
Besides capital machinery and raw materials, the consumer goods also have to be imported.
Salehuddin suggested taking steps to control imports by increasing domestic production specially agriculture production and there is no other way.
Experts also urged BB to enhance monitoring to check trade based money laundering, which is also being used to send black money abroad from Bangladesh in the guise of import.
According to the central bank, the supply of dollars has decreased in the currency market compared to the demand.
In such a situation, Bangladesh Bank is selling dollars so that no bank has any problem in paying the import bills. In addition, some other policy-making steps have been taken in the last few days, including controlling the import of luxury goods.
Md. Serajul Islam, BB spokesperson and executive director said, "Bangladesh Bank is doing everything to meet the demand for dollars."
He said the BB is selling dollars to increase supply in the currency market. At the same time, initiatives have been taken to discourage the import of luxury goods.
Besides, the government has given unlimited investment opportunities in 'dollar bonds' to increase the supply of dollars.
“The interest rate on these bonds for expatriates has also been reduced. This will reduce the outflow of dollars from the country in the form of interest. If the investment in this bond increases again, the dollar will enter the country,” said Serajul.
Also read: Japanese yen plunges to near 20-year low against U.S. dollar
Earlier, in a circular on April 11, the BB had directed to maintain a minimum cash margin rate of 25 per cent in case of opening LC for import of non-emergency goods.
Bank officials, however, say the central bank's cautious move to control the exchange rate of dollars is not working. The exchange rate of dollars in the interbank exchange is also increasing.
To buy cash dollars in the bank or 7kerb (open) market now people have to pay Tk 86 to Tk 92 per US dollar respectively.