Deepening dollar crisis set to multiply consumers’ woes

FE Team
| Published: November 12, 2023 20:10:16

The country’s foreign exchange (forex) market has gone berserk lately, as speculations about the short supply of greenback have gained strength. Kerb market operators, who are not guided by any rules and regulations, have been raising dollar-selling prices at will. Banks and authorized forex dealers that are supposed to follow the rates fixed by the Association of Bankers, Bangladesh (ABB) and the Bangladesh Foreign Exchange Dealers Association (BAFEDA) are, allegedly, taking recourse to devious means to hike dollar rates and make extra profit. Banks and other forex dealers blame some exchange houses abroad for the latest taka-dollar exchange rate volatility.
The speculation that the Bangladesh currency would lose its value further against the dollar coupled with growing political uncertainty has prompted many banks to go for aggressive buying of dollar at higher rates. This has influenced the kerb market to go for an exchange rate of Tk 128 for a dollar. For opening letters of credit (LCs), banks are now charging importers Tk 124 for a dollar. Clearly, the forex market volatility is linked to the country’s depleting reserves. The central bank is alive to the problem and has taken action against some delinquent banks. But the greed factor rules the roost when the demand-supply mismatch takes over. Many operators are clueless about the ongoing situation, as the central bank’s intervention, in terms of the supply of the dollar, has remained almost unchanged in recent months. The Bangladesh Bank has been pumping more than $1.0 billion into the banking system per month for a considerable period. They suspect hoarding of dollars by some banks out of greed to fetch extra profit in the future.
Undeniably, external factors, including the Russo-Ukraine war fallout, have played a major role in the depletion of the country’s reserves. The dollar crunch has been taking a heavy toll on the economy in general and consumers in particular. Yet the shock would not have been so severe had the central bank gone for market-driven exchange rate earlier. Suggestions for such a gradual adjustment fell on deaf ears. Under compulsion, it is now doing the same job at a faster pace, causing hardship to operators in the economy and consumers as well.
The dollar crunch is viewed as a major source of trouble for the economy. It has forced the government to impose restrictions on imports and withhold payment to some foreign service providers. The expensive dollar coupled with higher interest rates – with banks recently raising interest rates following the withdrawal of lending cap and upward revision of policy rates – is straining the economic activities of corporates, leading to their economic insolvencies. The plight of low- and middle-income consumers has only worsened because of the dollar crunch. Prices of almost everything, essential or otherwise, have gone through the roof because of the restrictions imposed on imports and greed for earning unusual profit by a section of local manufacturers and traders. The latest hike in dollar price only adds to the sufferings of the consumers, as imported goods are set to be pricier. If imported commodities are costlier, locally produced ones soon follow suit. Notwithstanding the government’s focus on all poll-related activities, it needs to spare some of its time to bring the minimum order in market giving some respite to the consumers and removing hurdles facing the businesses.