BB‍‍`s expenditure cuts stabilize exchange rates.

The Report Desk

Published: September 5, 2022, 08:14 PM

BB‍‍`s expenditure cuts stabilize exchange rates.

After four months of soaring exchange rates, the market seems stabilised due to Bangladesh Bank‍‍`s decision to restrict foreign currency expenditure.

As a result of several regulatory actions taken against banks and currency exchanges, the once tumultuous foreign exchange market today looks quite stable. The exchange rate for the US dollar at banks and the kerb market was Tk 95 and Tk 98-100, respectively.

 

Abdur Rouf Talukder has placed banks and non-bank financial institutions (NBFIs) under stringent scrutiny after his appointment as governor of the Bangladesh Bank on July 12, 2022.

 

UNB states that he organised various teams headed by deputy governors to investigate and oversee bank and non-bank financial institution (NBFI) activity.

 

Despite the central bank‍‍`s directives and instructions, numerous banks have violated the norms of international commerce, including opening letters of credit, trading dollars, and using credit cards to purchase foreign currency.

 

In light of this, Bangladesh Bank ordered 27 banks to explain extraordinary foreign exchange expenditure.

The central bank discovered excessive expenditure on 71 credit cards issued by 27 financial institutions. These cards have been traded for between $12,500 and $20,000 USD.

 

Sirajul Islam, the Executive Director and Spokesperson for the Bangladesh Bank, told UNB that the banks had been given five business days to clarify the discrepancies.

He said that each card had a $12,500 spending limit. However, an examination by Bangladesh Bank found that several banks had exceeded this restriction.

 

Each the Foreign Exchange Control Act, a person may spend no more than $12,000 in foreign currency per year. To increase spending in areas like healthcare and education, clearance from the central bank must be obtained beforehand.

 

Previously, credit for importing certain goods was discontinued, and the margin rate was raised. The treasury heads of six domestic and international banks have been relieved of their positions for generating extraordinary gains from dollar sales. Also slapped with show-cause notices were the managing directors of these institutions.

 

Eventually, Bangladesh Bank imposed a one taka profit per dollar to stabilise the foreign exchange market.

 

The central bank issued a notice on August 31 prohibiting anyone from holding $10,000 for longer than one month. Whoever had more than the allowed amount was required to sell it by September 30 or risk legal action.

Professor Mustafijur Rahman, the eminent fellow at the private think tank CPD, said that the central bank took the correct action by limiting dollar expenditure.

According to him, saving around one-third of foreign currency is feasible by reducing atypical expenditure on imports and other areas.

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