Shawdesh Desk:

The Bangladesh Bank has requested certain banks not to purchase dollars above Tk 123, amid growing criticism of its poor oversight, which has driven the greenback’s price to an alarming Tk 128 against the taka.

A number of senior officials of banks said that despite the official dollar rate being set at Tk 120 under crawling peg system, the central bank has asked certain banks not to buy dollars above Tk 123, a clear sign of its failure to enforce effective oversight.

The central bank has made the request to the banks which were allegedly purchasing dollar at a rate as high as Tk 126.

Instead of taking decisive action, the Bangladesh Bank merely issued another meek request, urging banks to refrain from driving up dollar prices further, economists said.

M Masrur Reaz, chairman and chief executive officer of Policy Exchange Bangladesh, criticised the sudden surge in the dollar price, calling it ‘unacceptable’ and partially avoidable through timely policy measures.

He remarked that such a spike had not occurred even during the economy’s worst periods. Although the dollar market had remained stable for the past five months, this abrupt hike within weeks could have severe consequences, he warned.

Reaz also criticised the central bank’s directive to purchase dollars at Tk 123 when the official rate stood at Tk 120, stating it could create chaos and confusion on the market.

He pointed to the Bangladesh Bank’s insistence on clearing foreign dues by December as a significant factor putting immense pressure on the market.

The central bank should have extended the timeframe for meeting IMF conditions and inject dollars directly into the market to stabilise prices, he said.

The dollar price surged to Tk 128 from Tk 120 in just 13 days.

In a meeting with the Bangladesh Bank on December 18, the IMF stressed the importance of adopting a more flexible and market-driven exchange rate system.

In response, the BB planned to introduce a reference rate for foreign currencies based on daily bidding rates provided by banks.

The dollar rate was Tk 94.7 in July 2022 and Tk 84.8 in July 2021.

Although remittance and export earnings increased in recent time, rising of the dollar rate to such level was unusual, bankers said.

They accused certain banks and money exchange houses of manipulating the market, stockpiling dollars unnecessarily and reselling them at exorbitant rates. This deliberate profiteering has further destabilised the forex market and exacerbated the crisis.

The Bangladesh Bank on Sunday sought explanations from 13 commercial banks regarding a sudden surge in dollar prices on the market.

The surge in dollar prices has cascading effects, with the cost of essential commodities like onions, dates, soya bean oil, lentils and spices expected to rise ahead of Ramadan.

The surge came at a time when government efforts to stabilise prices and ensure adequate supply during the holy month are already under strain.

Despite the central bank summoning explanations from 13 commercial banks regarding the sudden surge in dollar prices, these measures are widely seen as insufficient, as the market remains under severe pressure due to increased demand ahead of Ramadan.