Covid-19 impact: Taka falls 2% against dollar in two weeks

The taka has suddenly come under severe stress as an unusually low supply of the US dollar made it costlier for import payments, according to treasury officials of different banks.

The greenback was sold at Tk86.30 on an average on Wednesday for BC (bills for collection) sale – the rate at which banks settle import payments.  Just two weeks ago, a US dollar was sold at less than Tk85.

"Supply of the greenback has become so dearer that banks are offering over Tk86 for a dollar for getting foreign currencies from overseas expatriates. So, the BC sale rate has shot up," said a top treasury official of a private bank.

Interestingly, banks are showing the official rate at Tk84.95 a dollar, upon a verbal instruction from the central bank.

The Business Standard talked to several treasury officials and top bankers who said the gap between the demand and supply of dollar has been widened in recent days due to a drastic fall in export and remittance – Bangladesh's main two sources for foreign currency.

The first two weeks' export earnings plummeted to less than $200 million from over $1.1 billion for the same period a year ago. Inward remittance has also nosedived by over 30 percent so far this month.

Where has the demand increased amid the Covid-19 lockdown?

Usually, Bangladesh imports by opening two types of Letters of Credit (LCs) – cash and deferred. Payment for cash LC is settled within one month while deferred LC takes six months for that.

Of the import LCs, around 70 percent is deferred ones in Bangladesh, according to bankers. So, the demand for the US dollar is always there in the pipeline for clearing the payments, they said.

"Moreover, the import is much higher than the export as some commodities are being brought in to meet the additional demand during the upcoming Ramadan," said a treasury head of another private bank.

Mohammed Haider Ali Miah, managing director of EXIM Bank, said some banks are offering Tk86 plus for a dollar from remitters to meet their demand.

But the foreign currency is not a problem for all banks, said Ali citing that his bank has $107 million in surplus funds.

"Banks that are facing maturity of deferred LCs now are in need of the dollar," said Ali, also the general secretary of Bangladesh Foreign Exchange Dealers' Association. 

He hopes it is a temporary trend and will not last for many days as there will be a down in fresh imports.

"The Bangladesh Bank has told us that they are ready to support the market with the dollar anytime," he said.