Remittance dollar rate surges by Tk4 in a month

The dollar price for remittances has surged by Tk3-4 in a month due to increased demand and the central bank’s push to pay higher to boost foreign exchange reserves.

Senior officials at several public and private banks say since Eid-ul-Fitr, at least 10-12 banks have had to spend up to Tk116-117 for remittance dollars.

In the second week of March, the dollar price for remittances fell to Tk112.5-113 from February peak of Tk120-Tk122 per dollar, a range that continued for almost a year.

Explaining why the dollar rate fell in mid-March, a senior official at a bank said typically, opening of new letters of credit (LCs) for imports declines before Eid, leading to a decrease in demand for dollars.

“Besides, our balance of payments has a current account surplus,” he said.

The senior banker noted that a central bank deputy governor’s advice to banks to procure remittance dollars even at higher rates might have contributed to the hikes in dollar rate since the third week of March.

However, it is a relief that the dollar rate did not rise above Tk116-117 for a week after Eid opening, he also said.

The managing director of a leading private sector bank explained what might have prompted the senior central banker to ask bankers to offer beyond nominal rates for remittance dollars.

“The Bangladesh Bank was nearly $4 billion short of the $19.26 billion net reserve target set for March performance to qualify for the third tranche of the IMF’s $4.7 billion loan package,” he said.

This helped marginal increase in remittance inflow and the central bank “forcibly” bought some dollar deposits from banks under a currency swap arrangement in its bid to fill in the reserve gaps, the banker said.

He pointed to another possible impetus. Since the post-election stability in the country a group of people wished to bring back some of their laundered money home taking benefit of the incentives for inward remittance.

“Bringing some of the dollars – flown out of the country through export-import transactions – as remittance is more profitable because of a 2.5% cash incentive on top of higher rate of dollar,” he added.

Ahmed Shaheen, additional managing director of Eastern Bank Limited, strong performance in export front—around $5billion earning per month—has also slightly decreased demand for dollar.

Additionally, the opening of import LCs has also decreased significantly, resulting in less pressure on import LC payments. Due to these reasons, the dollar did not rise significantly, he added.

Will the dollar price rise further?

Bankers said whether the price of the dollar will increase depends on many factors.

A policy-making official at a bank said it is difficult to predict whether the dollar will appreciate further. The dollar rate for remittances was much higher in February.

“The amount of remittance we received that month did not decrease much even after the rate cut in March,” he added.

As the remittance rate reached Tk123, there was strong resistance, he said. Additionally, the demand for dollars in state-owned banks has not decreased significantly, but the demand in private banks has dropped compared to before.

“That means the potential for a crisis has decreased. Besides, there has been good growth in exports for several months, and imports are also decreasing,” he said.

As a result, he expressed optimism that there will be stability in the dollar market unless a very unusual situation arises.