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BB buying dollar to keep rate stable

Times Business Report - December 16th, 2012

The central bank is buying a large amount of dollars from the foreign exchange market almost every month to maintain stability of the exchange rate mainly because of a fall in import.
A Bangladesh Bank official said the main target of the central bank is to ensure competitiveness of export commodities and to keep inflation under control.
The central bank has bought $1.82 billion from the forex market from July 1 to December 11. In the first 11 days of December, the amount was $107 million.
The BB is buying dollars in a way that does not fuel the appreciation of the taka against the dollar, said the official.
In the recent times, the taka has been appreciated continuously against the dollar. On December 11, the taka’s weighted average rate against the dollar was Tk 80.80, down from Tk 81.32 on December 2.
The rates were Tk 81.38 on November 30 and Tk 81.82 on June 30.
The foreign exchange reserves also marked a rise in the recent times. The reserves stood at $12.11 billion yesterday, up from $10.36 billion on June 30.
According to BB statistics, imports fell by 6.75 percent in the July-October period of the current fiscal year compared to the same period last year, when imports rose by 23.13 percent.
Banks are opening letters of credit cautiously after the Hall-Mark scam. Also, many banks are deferring their import payments to next year.
The BB officials said Islamic Development Bank’s credit line for import of petroleum is about $2.5 billion this fiscal year, much higher than $1 billion last year.
As a result, the payments against petroleum import by the local banks are less this year, which is also a reason behind the low demand for foreign currency.
According to LC settlement statistics of the first four months of the current fiscal year, imports of food grain fell by 43 percent, capital machinery by 28.16 percent and petroleum by 7.45 percent.
Also, remittances rose by more than 24 percent in the first five months of the current fiscal year. Though export growth was slow, it increased by 3 percent in the first four months.