Central bank governor finds no reason to be over-concerned about forex reserve position
Md. Asiful Huq
The country's current foreign exchange reserve stands at $2.8 billion, which can meet three months' import and other payment requirements.
Talking to the FE, BB Governor Dr. Salehuddin Ahmed said Thursday it is true that import payment has increased in comparison to export earnings for the last few months but the gap between export receipts and import earnings is not significant.
"Forex market is quite stable and there is some pressure in the market for the rise in demand for the greenback to make payments for import requirements in excess of the export earnings recently," he added.
Ahmed also said the situation is totally under control. The reserve position is now at a comfortable level but it is "not very good", he added.
The BB governor said the amount of repatriation of foreign currency by some multinational companies (MNC) is also not too large to create volatility in the forex market.
Meanwhile, country's remittances has reached to $4.0 billion this year, indicating a 27 per cent growth over the 2004.
Sources said in spite of decline in manpower exports this year, remittances have increased significantly in 2005 over those of 2004 at $3.5 billion. A total of 250,000 Bangladeshis went abroad with jobs this year, showing a decline by nine per cent over the level of 2004 when the outflow of Bangladeshis to the overseas with jobs stood at 271,000, sources said.
Talking to the FE, chairman of Mutual Trust Bank Ltd. Syed Manzur Elahi said there is some pressure in the foreign exchange (forex) market due to the rise in demand for dollars by pilgrims to perform the holy Hajj.
"There is nothing to worry about the market as under the free-floating exchange rate, price is determined by the forces of demand for, and supply of, the foreign exchange," Manzur Elahi added.
In this connection, the former advisor to the caretaker government said repatriation by some multinational companies (MNCs) cannot make any significant impact on forex market.
He also said the market should be allowed to move in its own way to determine the rate of exchange of the Bangladesh Taka in relation to foreign currencies.
"All over the world where free floating exchange rate operates, there are rises and falls of the exchange rate.
Answering to a question whether BB should release more dollars, Manzur Elahi said if market demand increases abnormally, then the BB should consider it.
He, however, said the present situation of forex market is normal where free-floating exchange rate operates.
UNB adds: The third phase of World Bank's Development Support Credit (DSC) worth US$ 200 million was deposited with the central bank Wednesday to boost the forex reserve from US$ 2.6 billion.
The BB Governor said the disbursement of the credits as a budgetary support would help reduce government borrowing from the banking system as well as improve the balance sheet which the outside world cares about, for their trade and investment operations with a country.
Meanwhile, the Bangladesh Bank is expecting the release of US$ 74 million shortly from the International Monetary Fund (IMF) -- the fourth installment under the latter's Poverty Reduction Growth Facility (PRGF).
Dr Salehuddin, however, told the news agency that the reserve would again fall to some extent after a payment to be made to the Asian Clearing Union (ACU) in the first week of next month.
The reserve dropped to US$ 2.44 billion on November 29 from over US$ 3.0 billion at the end of June 30 last.
Replying to a question, he said the price of the dollar increased due to increased demand to meet import requirements. However, it would be reduced to some extent early next year as fertiliser imports would be reduced by then. The greenback traded on an average at Tk 66.21 Thursday.
The BB governor observed that the steady appreciation of the US dollar is unlikely to affect the economy.
Asked whether there is any chance for further depreciation of the local currency against the dollar, he said: "It'll depend on the market forces. A pressure is obvious if the gap between demand and supply increases."
He, however, said that the central bank was keeping a close watch over the market situation to do the needful, if any volatility emerged.
Earlier this month, the Asian Development Bank (ADB) projected that the country's forex reserve was unlikely to face any major shock in the foreseeable future.
The ADB's forecast was mainly based on a robust inflow of remittances and disbursements of foreign credits worth US$325 million from the pipeline, including the DSC and the PRGF.
The ADB also held out the assurance about its assistance to the tune of US$ 55 million that is expected to come forth soon.