‘Dollar crisis’ being seized upon by unethical traders to hike prices

Business Desk

Published: May 17, 2024, 08:48 AM

‘Dollar crisis’ being seized upon by unethical traders to hike prices

Representational Image

As it watched the country’s foreign exchange reserves keep draining away, from the peak of $48.1 billion in August 2021 to a net figure that may be less than $13 billion today, Bangladesh Bank became engaged in studying the minutiae of different types of calculations and definitions of a country’s reserve holdings, and all their different interpretations, like an A Levels Macroeconomics student.

The convoluted discussion it created around the country’s reserves - this formula, that formula, IMF manuals, and payouts from the reserve in the form of loans that were not initially disclosed, have all contributed to a cloud over the entire situation for a while now.  Consumers are forced to grapple with all kinds of different information becoming and some unethical traders are cashing in on this by increasing prices arbitrarily.

As a result, common people are suffering as businesses and different trading syndicates have taken to using the pretext of ‘the dollar crisis’ to hike prices. Talking with common people, economists and businesses, the correspondent got this opinion.

Mohammed Alam, 50, from Charfashion in Bhola, has been working in the Moghbazar area of Dhaka as an electrician for the last 17 years. He is self-employed and works on call if anybody needs an electric line installed, a fan to be setup, etc.

For the last one month, since Eid ul Fitr, Alam has been charging a minimum bill of Tk500 for any call leading to a home visit. Till Eid this year, and for the longest time in fact, this service was charged Tk300.

“We would not be able to provide service if anyone offered below Tk500, as prices of food, medicine, utility bills, our own expenses have shot up since the dollar crisis started. Why can’t our service bill increase,” said Alam.

Alam himself had to ask the UNB correspondent, if there is really a dire emergency over the reserves, because almost all shopkeepers have started charging a higher price for any product.

When Alam asked about the reason behind the higher price, they always replied “price hiked due to the dollar crisis in Bangladesh.”

Ekabbar Ali, 60, from Jamalpur Meladhoh Upazila, has worked as a rickshawpuller for the last 25 years, living in the capital’s Rampura area. He is now charging a minimum fare of Tk 30-40 for the same distance that he used to charge Tk20 to at times Tk25 till Eid ul Fitr.

Ali said that the garage from which he leased out ‘his rickshaw’ had increased the daily deposit it charged from its pullers each day. Everything increased recently claiming a ‘dollar crisis’.

“The prices of food, medicine, and all our bills have increased due to the dollar crisis. Imports had soared, as a consequence prices of almost all goods and services rose. If rickshaw fare is not increased, we cannot survive,” Ali said with absolute conviction.

Habibur Rahman, a grocery trader in Bara Moghbazar rail gate area, said that his suppliers are hiking prices several times a week, again claiming higher price of dollars. So they (traders) have to sell goods at an additional rate.

The central bank of Bangladesh provides 3 figures of Bangladesh‍‍`s foreign exchange reserves, measured by three methods.

Bangladesh Bank‍‍`s ‘total reserves’ fell to $23.77 billion (May 14) after meeting the liabilities of March and April to the Asian Clearing Union (ACU). Total reserves is a method of BB, which also includes the reserves money spent in the export development fund (EDF).

According to the IMF’s BPM6 method, the gross reserve figure is $18.32 billion. While actual or usable reserves are slightly less than $13 billion. In calculating actual usable reserves showed excluding different debt liabilities. This method is also followed by the IMF to understand the financial health of Bangladesh.

According to a central bank official, the amount of usable reserves is slightly less than $13 billion, which is referred to as net reserves in the media. This calculation of reserves excludes the money repaid for loans from the Export Development Fund, as well as the dollars held as SDRs by the IMF.

However, the central bank never publishes the net reserve data officially.

Dr Ahsan H. Mansur, executive director of the Policy Research Institute and a former senior economist at the IMF’s Washington office, told UNB that the gross reserves are now $18 billion-plus. It means reserves are not at risk yet.

But there is a lack of confidence in the money market and macroeconomic situation, and the reserves of Bangladesh remain in an unstable situation, he said.

Uncontrolled money laundering has created a sense of alarm over the Bangladesh economy, which is bringing instability in reserves and macroeconomic management as well, Dr Mansur pointed out.

Dr Zahid Hussain, the former chief economist of the World Bank in Dhaka, said that there are two principal risks associated with rapidly dwindling forex reserves. One is the inability to make dollar payments, which would usually be required for imported goods. The associated fall in imports may lead to increased prices in domestic markets.

Link copied!