Bangladesh Bank Governor Dr. Ahsan H. Mansur assured on Thursday that the country is not facing a shortage of foreign exchange and encouraged the business community to proceed with the import of essential goods to meet market demand. "Currently, we do not have any shortage in foreign exchange. Anyone can open an LC," Dr. Mansur said, speaking to reporters after a meeting on inflation at the Finance Ministry, chaired by Finance Adviser Dr. Salehuddin Ahmed. Emphasizing the need to address demand in the market, Dr. Mansur urged businesses to act decisively. "Open your LC, import essential items, and meet the demand," he advised. Bangladesh Bank Governor urges patience as it could take 12-18 months to curb inflation In his remarks, the central bank governor reaffirmed his belief in a free-market economy, expressing confidence that market forces would help stabilize the current economic situation. "We will take necessary measures, but it will take time to cool down the situation," he added. Dr. Mansur detailed several government initiatives aimed at easing inflation, including expanding rationing programs. He announced that the government will soon increase the distribution of essential commodities to 10 kilograms, up from the current five kilograms, for each of the 10 million beneficiary families. "We are increasing the number of trucks for the Open Market Sale (OMS) initiative," he noted, aiming to improve accessibility to essential goods at controlled prices. Addressing inflation directly, Dr. Mansur emphasized that inflation is "ultimately a monetary phenomenon" and that it must be managed through effective monetary policy. He cautioned against excessive market intervention, recalling past incidents where heavy-handed measures led to product shortages. BB will ask banks not to impose LC margin on essentials import until Ramadan "If we apply too much pressure, products will disappear from the market. We saw this during the 1/11 period and again in the recent egg crisis," he warned. Instead, he advocated for "light-touch qualitative monitoring," saying, "We are putting pressure through dialogue, not over-monitoring." Dr. Mansur emphasized a measured approach to market control, discouraging impulsive decision-making. "We aim for a balanced approach. There is no scope for rash decisions in this context. We believe that the situation will stabilize—it just needs time," he concluded, expressing confidence that government efforts to increase supply would eventually help bring relief.

International Air Transport Association (IATA) has urged Bangladesh to pay $320 million funds blocked by the government for 40 months. At the same time, Pakistan was also asked to clear its dues of $411 million which has also been held for 40 months. IATA Member Certificate handed over to US-Bangla Airlines Globally, blocked funds have decreased by 28% to $1.8 billion since December 2023. This improvement is largely due to significant clearances in Nigeria and Egypt. However, airlines in both countries faced losses due to currency devaluations, according to a media release on Sunday. The situation is particularly concerning in Bangladesh and Pakistan, IATA said, where airlines are unable to access a combined $731 million in revenue. IATA Director General Willie Walsh urged both countries to prioritize the release of these funds to ensure continued air connectivity, said the release. US-Bangla gets recognition of IATA Airlines “Pakistan and Bangladesh must release the $731 million in blocked funds immediately,” said Walsh. “In Bangladesh, the solution is in the hands of the Central Bank, which must prioritize aviation’s access to foreign exchange in line with international treaty obligations. The solution in Pakistan is finding efficient alternatives to the system of audit and tax exemption certificates, which cause long processing delays,” he added. Nigeria's success story provides a blueprint for resolving this issue. With government intervention, 98% of the previously blocked funds have been cleared, significantly improving the situation for airlines operating in the country. Travel momentum builds as restrictions are lifted: IATA Eight countries are responsible for the lion's share of the remaining blocked funds, with a combined total of $1.6 billion representing 87% of the issue. Pakistan tops the list, followed closely by Bangladesh. Other significant contributors include Algeria ($286 million), XAF zone countries ($151 million), Ethiopia ($149 million), Lebanon ($129 million), Eritrea ($75 million), and Zimbabwe ($69 million). These figures highlight the specific challenges faced by airlines operating in these regions.

Bangladesh's economy made a strong turnaround from the COVID-19 pandemic, but the post-pandemic recovery continues to be disrupted by high inflation, a persistent balance of payments deficit, financial sector vulnerabilities, and global economic uncertainty, says the World Bank in its twice-yearly update. Released today, the latest Bangladesh Development Update says that urgent monetary reform and a single exchange rate regime will be critical to improve foreign exchange reserves and ease inflation. Greater exchange rate flexibility would help restore balance between demand and supply in the foreign exchange market.  “Bangladesh’s strong macroeconomic fundamentals have helped the country overcome many past challenges,” said Abdoulaye Seck, World Bank Country Director for Bangladesh and Bhutan.  “Faster and bolder fiscal, financial sector, and monetary reforms can help Bangladesh to maintain macroeconomic stability and reaccelerate growth,” he added. Structural reforms will be key to diversify the economy and build resilience over the medium and long term, including measures to raise government revenues to support investments in infrastructure and human capital, said the global lending agency.  Persistent inflation eroded consumer purchasing power, while investment was dampened by tight liquidity conditions, rising interest rates, import restrictions, and increased input costs stemming from upward revisions in administered energy prices. Foreign Minister for concluding PTA with Indonesia Private sector credit growth slowed further in FY24, reflecting a broader slowdown in investment.  The non-performing loan (NPL) ratio in the banking sector remains high and understates banking sector stress due to lax definitions and reporting standards, forbearance measures, and weak regulatory enforcement.  The balance of payments deficit moderated over the first half of FY24 driven by a surplus in the current account. The report’s companion piece, the latest South Asia Development Update — Jobs for Resilience, also released today, says that South Asia is expected to remain the fastest-growing region in the world for the next two years, with growth projected to be 6.0% in 2024 and 6.1% in 2025.  Growth in South Asia is expected to be driven mainly by robust growth in India and Bangladesh, and recoveries in Pakistan and Sri Lanka. But this strong outlook is deceptive, says the report. For most countries, growth is still below pre-pandemic levels and is reliant on public spending.  Persistent structural challenges threaten to undermine sustained growth, hindering the region’s ability to create jobs and respond to climate shocks.  Private investment growth has slowed sharply in all South Asian countries and the region is not creating enough jobs to keep pace with its rapidly increasing working-age population. “South Asia’s growth prospects remain bright in the short run, but fragile fiscal positions and increasing climate shocks are dark clouds on the horizon,” said Martin Raiser, World Bank Vice President for South Asia.  “To make growth more resilient, countries need to adopt policies to boost private investment and strengthen employment growth.” Saima Wazed, Princess Dechen Yangzom Wangchuck launch Bhutanese version of Bangabandhu’s ‘Unfinished Memoirs’ South Asia’s working-age population growth has exceeded than that in other developing country regions.  The share of the employed working-age population has been declining since 2000 and is low.  In 2023, the employment ratio for South Asia was 59%, compared to 70% in other emerging markets and developing economy regions.  It is the only region where the share of working-age men who are employed fell over the past two decades, and the region with the lowest share of working-age women who are employed. “South Asia is failing right now to fully capitalize on its demographic dividend. This is a missed opportunity,” said Franziska Ohnsorge, World Bank Chief Economist for South Asia. “If the region employed as large a share of the working-age population as other emerging markets and developing economies, its output could be 16% higher.” Read more: Money launderers destroying country's economy: Salma Islam

Despite relaxed conditions for net reserves by the International Monetary Fund (IMF), Bangladesh could not meet the foreign exchange reserves target at the end of 2023. According to the IMF loan documents, the actual reserves were supposed to be USD $17.78 billion at the end of December 2023. However, as the year ended, the actual reserves stood at about $16.75 billion. Not much difference between political parties' views on energy situation: CPD Bangladesh Bank could not meet the reserves target as per IMF conditions by September-end as well. Later, the global lender reduced the reserves conservation target at the request of Bangladesh. Even the revised target could not be achieved by the end of December 2023. According to IMF's new conditions, the real reserves are expected to be $19.26 billion in March and $20.10 billion in June 2024. However, financial sector stakeholders cannot determine whether this goal will be achieved. The real reserve is the reserve that is calculated after excluding the SDR of the IMF, the dollars kept as foreign exchange clearing by the banks, and the dollars deposited for the Asian Clearing Union (ACU) bills. Apart from this, there are two other accounts of reserve. One of them is total reserve. Another IMF accounting system is reserves maintained under BPM6. At the end of the year 2023, total forex reserves increased to $27 billion. However, what the IMF considers is only net or real reserves. Md Mezbaul Haque, spokesperson and executive director of Bangladesh Bank told UNB that the central bank worked to keep the reserves above $17 billion, as per the IMF-set target. Former IMF economist Dr Ahsan H Mansur told UNB that it is unexpected that the IMF-set target could not be met even after reducing the previous target. Habiganj-2: JaPa candidate withdraws from election citing 'lack of fair environment' He also doubted that Bangladesh Bank will be able to maintain IMF’s foreign exchange reserves target in March 2024, if the central bank does not change its policies.

Bangladesh’s foreign exchange reserves continued to fall with the usable reserves standing now at USD $ 15.82 billion as per IMF guideline, according to banking sources familiar with the development on Tuesday (November 28, 2023). During the period of the COVID-19 pandemic two years ago, the reserves had soared to $48 billion, thanks to greater inflow of remittances amid reduced import demand. The reserves started decreasing since the eased import restrictions and impact of the Russia-Ukraine war. Also read: Forex reserves below $20 billion after paying ACU The latest foreign exchange report of Bangladesh Bank (BB) revealed that the country's reserves on 23 November stood at $19.52 billion based on the IMF formula (Balance of Payments and International Investment Position Manual) or BPM6. As per the formula, the net reserves will be $3.7 billion less than the total reserve amount, the BB sources said. The BB spokesperson Mezbaul Haque in this regard told UNB that foreign exchange from reserves is spent and deposited every day. Also read: IMF relaxes forex reserve and revenue targets for $4.70 billion loan It is a continuous process of a country, he said advising common people not to panic at the news of decreasing foreign exchange. In July, Bangladesh started calculating its foreign reserves according to a formula suggested by the International Monetary Fund – BPM6. Following the new calculation, Bangladesh's gross foreign exchange reserves that time dropped by $26.44bn to $23.56bn. Also read: Bangladesh stands on the edge of deep ditch before the polls: Dr Debapriya

Former Chief Economist of the World Bank's Dhaka office Zahid Hussain said on Wednesday (October 04, 2023) that the actual calculation of foreign exchange entering into the country and leaving does not match.He said that the reserves are decreasing due to a deficit in the balance of payments or transaction balance. The net reserves of foreign exchange as per BPM-6 is below $18 billion.Zahid gave this information while speaking at the annual conference of the International Business Forum of Bangladesh (IBFB) held in a city hotel on Wednesday. Indian High Commissioner to Dhaka, Pranay K. Verma, was the chief guest at the event. Read: IMF reviewing reserves, macroeconomic condition ahead of next fund releaseHe pointed out that one of the reasons for the overall macroeconomic instability of the country is external. The major aspect of this external factor is the price of the dollar.The exchange rate of the US dollar was remained below Tk100 in 2021. But in September 2022 it went above Tk100. It is still above Tk110 even though it has decreased a bit now.Zahid complained that the account of how much foreign currency is entering the country and how much currency is going outside does not match with the reserve. Read: Why Bangladesh’s forex reserves dipped to $21.15 billion? Economists cite reasonsHe said that usually this calculation is sometimes positive and sometimes negative. But recently it is seen in case of Bangladesh, this account has been negative for quite some time."This means that something is happening beyond our knowledge,” he said.

Bangladesh’s export earnings hit a record high of $52.08 billion in FY22. However, inflation and economic slowdown across the world impacted the country's export earnings. Though clothing is the main export product of Bangladesh, the export basket includes many other products that contribute significantly to the economy. Let’s take a look at Bangladesh’s top export products. 10 Major Exportable Products of Bangladesh Bringing Highest Earning  Besides the apparel industry, small factories of various export products have been developed in all corners of the country by private initiatives. Here are the product categories that bring the highest foreign exchanges for Bangladesh. 1. Readymade Garments In Fiscal Year (FY) 2021-2022, the export value of Bangladesh’s Ready-Made Garment (RMG) sector reached an estimated $31.46 billion or approximately Tk. 3,33,639 crore (the exchange rate is equivalent to Tk. 106.05), which was a growth compared to the previous year’s figure of $27.95 billion or approximately Tk. 2,96,415 crore  (the exchange rate is equivalent to Tk. 106.05). Read More: BGMEA, SOWTEX to help connect more Bangladeshi RMG exporters with Indian textile suppliers The RMG exports of Bangladesh comprise a wide range of knitwear and woven garments, including shirts, pants, T-shirts, jeans, jackets, and sweaters. Notably, the Export Promotion Bureau (EPB) statistics indicate that knitwear products saw a remarkable rise of 36.88% to $23.2 billion, or approximately Tk. 2,46,040 crore, outstripping woven garments, which increased by 33.82% to $19.4 billion or Tk. 2,05,741 crore approximately. This surge in the apparel industry has had a great impact on Bangladesh’s economic development. The major foreign markets for Bangladesh’s RMG exports in FY22 were the United States, the United Kingdom, Germany, Italy, France, Spain, the Netherlands, Canada, and Belgium. 2. Jute and Jute Products Bangladesh is one of the leading exporters of jute and jute products in the world. The country has a long history of jute cultivation and manufacture, dating back to the colonial era. Bangladesh’s jute industry is in the middle of a period of immense success. Read More: Export of jute products a boon for Satkhira women.

Bangladesh Bank in a directive on Thursday said that money changers trading in foreign currency can keep a maximum of Tk 50 lakh cash at hand. The Foreign Exchange Policy Department of Bangladesh Bank issued a circular in this regard and sent it to the top executives of banks for immediate effect. According to Foreign Exchange Transactions Guidelines, the maximum stock of cash of a money exchanger must not exceed $25,000 or equivalent at the close of each business day. If their cash dollar amount is more than this limit then at the end of the day the establishment should deposit it in the foreign currency account of the respective bank. The balance of that account must not exceed $50,000 or equivalent at any point in time. Read: Remittance: Bangladesh Bank tells banks to provide Tk 107 per dollar The central bank sealed seven unlicensed, illegal institutions on September 27 and 28 due to dollar manipulation in the country. Before that, 42 companies were served show cause notice due to various irregularities in dollar trading. The licenses of five more establishments have also been suspended. The latest circular aims to establish a stable foreign exchange market in the country.

Expatriate Bangladeshis will get maximum Tk 107.5 per US dollar instead of Tk 108, for remittance from October 1, 2022. Association of Bankers, Bangladesh (ABB) and Bangladesh Foreign Exchange Dealers’ Association (BAFEDA) have set this rate for remittance next month – to stabilize the forex market. Economists are saying controlling the exchange rate would have negative impact on the current inward remittance flow. Read: Bangladesh received over $1 billion remittance in Sep 1-15 Economist and Chairman of PRI, Ahsan H Mansur, told UNB that this is not the right decision to attract more remittance when the kerb market rate is over Tk 114 per dollar. It may encourage sending money through illegal channels, which does not help in resolving the forex crisis, he said. Professor Mustafizur Rahman, distinguished fellow of CPD, also said that controlling exchange rate is not helpful when market demand for forex is expanding. Read:Uniform rate: Tk 108/dollar max for remittance, Tk 99/dollar for export income from tomorrow He said several rates for US dollar will create discrepancies and discourage remittance flow.  The illegal sector will be encouraged while exchange rate difference between banks and kerb market will be widened, Prof. Mustafizur said. According to the decision of the meeting held on Monday, remitters will get maximum Tk 107.5 per US dollar. Earlier on September 11, ABB and BAFEDA fixed the maximum price of a dollar at Tk 108 for remittance. Read Explainer: What it means to let taka float The dollar rate of export income monetization will remain at Tk 99 per dollar as before. In the case of payment of import liabilities and inter-bank transactions, price of dollar will be Tk 1 higher than the average price of a dollar bought from expatriate and export earnings. At the end of the meeting, BAFEDA Chairman Afzal Karim told the reporters, “There was supposed to be a price review from time to time to keep the dollar market normal.” “In continuation of this, we have decided the new price. The new price will be effective from October 1,” he said. Read How to safely send remittance to Bangladesh?

We are in the middle of the first full working week since Bangladesh’s declared adoption of a floating exchange rate for taka against the US dollar, paving the way for the forces of demand and supply - in a word, the market - to determine the rate going forward. Bangladeshi officials however, have a history of such utterances, without the necessary follow up actions. Most famously perhaps, there is even a formal commitment from 2003 (Bangladesh Bank. Exchange Rate Circular No. 01, 2003 – still available on the BB website), that the central bank subsequently abandoned. As a result, for almost its entire existence as a sovereign currency, taka’s value has been artificially set by the country’s monetary authority, i.e. Bangladesh Bank, and then allowed to float within a certain band - the so-called managed or ‘dirty’ floating exchange rate. Read: Banks reschedule loans worth nearly Tk 6000 crore, waive Tk 2800 crore in interest in first 6 months of 2022 In order to maintain the rate at or near its preferred level, the central bank would intervene in the currency markets to buy or sell dollars as the intervention currency. Maintaining an artificially overvalued rate in comparison to the market value, as Bangladesh Bank has almost always done, necessitates selling dollars from its foreign exchange reserves. Why now? But the “strongest dollar in a generation”, witnessed over the last year or so and likely to persist well into the foreseeable future, was starting to make the dirty floating system very expensive to maintain for Shapla Chattor, rapidly depleting its reserve of dollars. In the 2021-22 fiscal, that ended on June 30, Bangladesh Bank spent $7.62 billion from the country’s foreign exchange reserves as it scrambled to slow down taka’s slide against what some are calling “the hideous strength of the dollar.” In the first two months of the current fiscal, July-August, that coincided with a period in which even the government was forced to recognise the impacts of a range of worrying signs for the economy, it escalated dangerously. Read: Bangladesh received over $1 billion remittance in Sep 1-15 During this period, the central bank spent a further $2.85 billion on shoring up its preferred, overvalued rate, or rates, as it kept stretching to hold on, for taka against the dollar. If you annualise that, you’re looking at spending over $15 billion over the course of the fiscal. Probably more, with all the signs being that US Federal Reserve policies are likely to strengthen the greenback further over the foreseeable future. At a time when the quite rapid depletion of the forex reserves from its peak of $48.1 billion in August 2021 to some $37 billion at the moment has become a matter of concern (and the IMF credibly contending that effectively it is a further $7 billion less), the central bank has been forced to realise it is unsustainably costly to hold on. It has to let taka float. Read Uniform rate: Tk 108/dollar max for remittance, Tk 99/dollar for export income from tomorrow Does it mean BB will not sell dollars again? What that basically means is to adopt a hands-off approach. To refrain from using its intervention tools. Importantly though, it doesn’t give up its authority to do so. It may become interventionist again, at any point - unless it gets to a point where you are charged as a ‘currency manipulator’, as the US did with China in 2019, there is nothing really to give you pause even, once you decide to do it. There is nothing to bind you to ‘letting it float’. And central banks can be clingy. There are no purely floating currencies, it’s all a bit relative. Canada has had a floating exchange rate for longer than any other country. The Canadian national bank has not interfered with its dollar’s price since 1998. The US dollar is a close second. By contrast, Japan and the UK intervene to a greater extent, and India has medium-range intervention by its national bank, the Reserve Bank of India. What kind of exchange rate regime a country maintains over a given period is actually a call that can only truly be made after the event, when you have the data to tell you to what extent there may or may not have been intervention. It’s a bit like assessing whether you’ve been faithful in a relationship or not - you cannot have it up front. You have to look back. Read ABB, BAFEDA will meet tomorrow to set uniform dollar rate for banks But a commitment can be important, and the closest thing resembling such a commitment for Bangladesh Bank that suggests it is preparing to go further this time than it has gone before to letting the currency float came last week: for the first time, Shapla Chattor appeared to accept a suggested rate from the market, along with a mechanism for determining it on a regular basis going forward. What is the market rate? The task for coming up with the market-determined exchange rate had been left to the Bangladesh Foreign Exchange Dealers' Association (Bafeda), in consultation with the Association of Bankers Bangladesh (ABB). After months of meetings between the three parties, last week (September 11), the rate put forward by them, along with a mechanism - a weighted average based on actual transactions over the previous 5 working days - was accepted by Bangladesh Bank in a meeting, and subsequently announced. Since September 13, this rate has been published on the BB website as the nominal rate for the dollar, along with the following note: “Exchange rates of Taka for inter-bank and customer transactions are set by the dealer banks, based on demand-supply interaction and indicative rates suggested by Bangladesh Foreign Exchange Dealers' Association. Bangladesh Bank is not in the market on a day-to-day basis, and undertakes USD purchase or sale transactions with dealer banks only as and when needed to maintain orderly market conditions.” Read Foreign exchange rate stable after Bangladesh Bank tightens spending Note the phrase "as and when needed" - it tells you that should the need arise (most likely if the government perceives taka has depreciated too much), the central bank still reserves the right to intervene and effectively override what it has committed to. There will be teething issues - reports suggest Bangladesh Bank is still selling dollars, but if it stays the road, this will taper down. There are criticisms of the agreement entered into with BAFEDA, in particular how it creates three different dollar rates - one for exporters, one for remitters and one for importers. And leaving the exchange rate to the market while holding on to a fixed interest rate regime (interest rate on lending is currently capped at 9%) goes against conventional wisdom in economics. These are issues we will get to explore in future. Explainers related to the economy are vetted by economists. Read BB eases outward remittance rules for foreigners