Dr. Ahsan H. Mansur, governor of Bangladesh Bank, recently predicted that the dollar exchange rate would stay steady over the next several months. During the monetary policy announcement ceremony for the second half of the current fiscal year, he made reference to this information.
According to the governor, a large number of letters of credit (LCs) for imports were opened in December, and more will be opened in January. After Eid, there won’t be any significant payment demands, though. Along with paying for fertilizers and other imports, borobo paddy has also been planted in the field. Additionally, a sizable payment for the Hajj has been made. He believes that by February, these demands will stop, and there won’t be any significant pressure on the dollar rate.
The governor stated that good remittances were received in certain days of February and that remittance inflows will increase during Ramadan and the Hajj. In the future, he hopes, this flow will also continue. Remittances have increased by 24% over the past seven months, and this growth can be sustained going forward. According to him, an extra $11–12 billion will be available to help meet the demand for imports if remittances reach $6 billion annually and exports reach $5–6 billion.
As part of the new monetary policy, Bangladesh Bank is introducing a crawling peg exchange rate mechanism, which will improve the exchange rate’s stability and flexibility. The way this mechanism is made allows for preparations to be made for the transition to a more flexible exchange rate system in the future.
Bangladesh Bank has already ceased to intervene in the market and sell foreign exchange in the interbank market. By doing this, a system for determining the spot reference exchange rate—which is released twice daily using information from banks—has been put in place.
In order to preserve the stability of the nation’s economy and currency market, the governor anticipates that this exchange rate management will boost exports, improve remittance flows, and expand foreign exchange reserves.
