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Dollar continues to be pricier vis-a-vis Taka in kerb market

bluesky

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Dollar continues to be pricier vis-a-vis Taka in kerb market
JASIM UDDIN HAROON | Published: October 27, 2021 08:51:18 | Updated: October 27, 2021 11:35:38
Dollar continues to be pricier vis-a-vis Taka in kerb market

The price of US dollar continued to surge unabated in the kerb market on Tuesday, frustrating many, especially the outbound people.

The value of the greenback, which crossed Tk 90 mark for the first time on Monday, further spiked by 20 paisa on Tuesday.

Market insiders, however, attributed such rise in value of dollar to its increased demand in recent times amid increased business activities and tourism.

But the central bank's interbank dollar exchange rate on Tuesday was Tk 85.65, although many said they bought the same from banks at much higher rate the same day.

Banks come to buy currencies from the kerb market at a time when they have less than the amount of forex needed to meet such payments.

"Our business boosts after a long period as the number of international flights increased following the reopening of economies globally," said Money Changers' Association of Bangladesh president AKM Ismail Haq.

October 15 was the busiest day for commercial air traffic so far this year with 102,964 flights tracked, according to flightradar.com. The demand for foreign currencies from individuals on physical counters has improved significantly over the past few weeks from Tk 87-88, he added.

Money-changers are now passing their busiest days after a long slump as a result of the coronavirus pandemic. The local firms, who mostly trade in foreign currencies with individuals on physical counters in the open market, collect dollars and others from international passengers, mostly from expatriate Bangladeshis.

The major buyers of the same are also international passengers who leave Bangladesh for business or other purposes. A section of money-changers says the price of dollar has been rising as its value is on the rise in neighbouring India, now around 80 rupees or Tk 98.

They hint that many India-bound passengers are buying dollar much in order to sell it there.
Shakawat Hossian Kabir, owner of National Money Changers' Limited, says: "The price of dollar in India remained much higher than the Bangladesh market."

"I don't know as to whether the greenback is being smuggling out or not," he remarks.
According to currency traders, both demand for and supply of foreign currencies had declined significantly as public movement to and from Bangladesh remained much lower even a month back.

jasimharoon@yahoo.com
 

Bilal9

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Ideally Taka should be at 100 to the dollar if not 120 - to help exports. That is the need of the day. I don't know if it will help remittances though.
 

bluesky

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Ideally Taka should be at 100 to the dollar if not 120 - to help exports. That is the need of the day. I don't know if it will help remittances though.
The Real Effective Exchange Rate (REER) is already 107.6 Taka per dollar. The way I see it will fall to at least 120 Taka because this year another $2.5 billion (assumed, but last year it was $1.9 billion) will have to be repaid to the loan sharks.

Unless the GoB stops borrowing in two hands, there is a possibility of heavy inflation and a free fall of Taka. However, increased export and FDIs would help the situation.

You guys will not like to hear when I say there is no free lunch and no development with foreign money. Wealth must be produced inside the country that sustains the construction of infrastructure construction.

Today, the mind of deceased finance minister Saifur Rahman is more needed.
 

Bilal9

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The Real Effective Exchange Rate (REER) is already 107.6 Taka per dollar. The way I see it will fall to at least 120 Taka because this year another $2.5 billion (assumed, but last year it was $1.9 billion) will have to be repaid to the loan sharks.

Unless the GoB stops borrowing in two hands, there is a possibility of heavy inflation and a free fall of Taka. However, increased export and FDIs would help the situation.

You guys will not like to hear when I say there is no free lunch and no development with foreign money. Wealth must be produced inside the country that sustains the construction of infrastructure construction.

Today, the mind of deceased finance minister Saifur Rahman is more needed.

Take a look... :lol:


 

bluesky

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Take a look... :lol:


So, the BAL govt is not only providing false GDP figures but also foreign exchange reserves to look good. Bloody liers.

Now, IMF and others have to believe in the GDP figures provided by the govt of a country. But foreign exchange reserve is different. The black cat is out.

@UKBengali, please come with many excuses.
 

UKBengali

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So, the BAL govt is not only providing false GDP figures but also foreign exchange reserves to look good. Bloody liers.

Now, IMF and others have to believe in the GDP figures provided by the govt of a country. But foreign exchange reserve is different. The black cat is out.

@UKBengali, please come with many excuses.


Nope, if you read the reasons that the IMF gave then it was clear that the calculation by IMF of how to work out foreign exhange reserves was different to that of BD.

These reserves do exist but due to the way that IMF measures available reserves they discounted them - it needs to use a standard measure to be able to compare across different countries.

As for GDP calculation, well the growth rate must be correct as BD revenue collection is growing in line with the figures. The most you can argue is that the total GDP may be overstated but then the onus is on you to provide solid evidence for this as IMF and all other economic forecasters accept the numbers.
 

Crimson Blue

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Why you guys having such a lengthy & technical discussion over USD exchange rate?

In Pakistan, we just blame PTI government for it and get done with it.... easy :D.
 

bluesky

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Please read post #4 posted by @Bilal9. Below is the full news.

Forex reserves overstated by $7.2bn: IMF
The foreign exchange reserve of $46 billion as reported at the end of June this year was overstated by 15%

non-reserve_assets_of_forex_reserve-01.png

The Bangladesh Bank has overstated its foreign exchange reserves by $7.2 billion through inclusion of non-reserve assets underestimating related risks, the International Monetary Fund says.
In a draft report on safeguards assessment of the Bangladesh Bank for 2021, the IMF has identified the misclassification of foreign assets leading to an inflated foreign reserve held by the central bank.
The foreign exchange reserve of $46 billion as reported at the end of June this year was overstated by 15%. Originally, the forex reserve would be $39 billion, according to IMF calculation.
Explaining this finding, the global lender has said a portion of the reserve has been used to finance, deposit with resident banks, invest in non-investment grade bonds and lend to Sri Lanka following the decisions of the central bank board and its investment committee.

Yet the central bank continues to include these non-reserve assets in the performance and risk analysis for foreign reserves
"Such exaggeration of foreign reserves leads to a wrong judgement about their redundancy," said the IMF report, which also mentioned that the Bangladesh Bank has limited expertise and constrained IT capacity.
The IMF recommended that the Bangladesh Bank should manage foreign reserves separately from non-reserve assets to avoid overstatement of foreign currency liquidity and underestimation of related risks, and report transparently.
When contacted about the issue, Kazi Sayedur Rahman, deputy governor of the Bangladesh Bank who is responsible for the Forex Reserve and Treasury Management Department, refused to explain the IMF's claim of overstating foreign exchange reserves.
Another senior official of the Bangladesh Bank on condition of anonymity told The Business Standard that the respective department was preparing a written answer for the IMF over the issue.
Referring to the Bangladesh Bank's disbursement of $250 million to the central bank of Sri Lanka as foreign currency support, the IMF report said the short-term financing was guaranteed by a deposit in Sri Lanka rupees of equivalent amount at the Bangladesh Bank. The lending in foreign currency should be ideally collateralised in the same currency of the loan, the report pointed out.
The non-reserve assets that IMF identified are- foreign currency loans to local banks-- $6198 million, deposit with state-owed local banks--$651 million, deposits with ITFC (IDB Group)-- $288 million and fixed income securities below investment grade-- $60 million.

Can’t have your cake and eat it too

The IMF also raised an objection to the utilisation of $2 billion from foreign exchange reserves for the government's priority infrastructure projects including the Payra Port.
In the report, the IMF said that large infrastructure projects often suffer from significant under-management of risks and providers of finance typically bear the immediate losses. Consequently, there is a risk of foreign reserves depletion, as well as financial loss for the Bangladesh Bank.
The report recommended that before making any commitments to finance infrastructure projects, the central bank should diligently monitor the level of its foreign reserves, considering balance of payment pressures as well as volatility in remittances and trade.
The government created the Bangladesh Infrastructure Development Fund (BIDF) where the central bank committed to provide $2 billion from its foreign exchange reserve to finance port and power sector infrastructure projects.
The foreign exchange market came under pressure amid rising import expenditure and slow remittance inflow in the subsequent period.
The current account balance turned to negative $1.24 billion in July-August period of the current fiscal year which was a surplus of $3.22 billion in the same period of last year, according to Bangladesh Bank data.
Dollar price remained upward since last month amid rising demand.
The inter-bank exchange rate increased to Tk 85.65 per dollar in October which was Tk 85.20 in the previous month, central bank data shows.
The dollar crisis has prompted the Bangladesh Bank to backtrack on its dollar buying spree and start selling dollars to banks in order to keep the market stable.
The Bangladesh Bank bought a record $8 billion US dollars in the fiscal 2020-21 amid low imports and high inflow of remittance.
However, since August this year, the Bangladesh Bank has sold $305 million dollars to banks, according to the central bank's data
 

Pandora

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All of this is consequence of heavy borrowing from international market. When previously i mentioned sideeffects of boosting reserves via borrowing some Bangladeshi friends went bat $hit crazy. Bangladesh is reaching a tipping point in term s of borrowing and spending where they will see a free fall of Takka as a result shrinkage of reserves and gdp in dollar terms. There is still time as bangladesh can strap its belt tight rather than be a glutton for foreign borrowed dollars. Pakistan fell in same pit and now we are suffering badly due to similar decisions made by consecutive PPP and PMLN govt.
 

UKBengali

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All of this is consequence of heavy borrowing from international market. When previously i mentioned sideeffects of boosting reserves via borrowing some Bangladeshi friends went bat $hit crazy. Bangladesh is reaching a tipping point in term s of borrowing and spending where they will see a free fall of Takka as a result shrinkage of reserves and gdp in dollar terms. There is still time as bangladesh can strap its belt tight rather than be a glutton for foreign borrowed dollars. Pakistan fell in same pit and now we are suffering badly due to similar decisions made by consecutive PPP and PMLN govt.



Pakistan pays back SIX times as a proprtion of its revenues in debt repayments compared to BD.

Just this week Saudi deposited 3 billion US dollars to shore up Pakistan's finances.

Please tell us in numerical terms how the situation of BD and Pakistan are in any way comparable.
 

Destranator

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Ideally Taka should be at 100 to the dollar if not 120 - to help exports. That is the need of the day. I don't know if it will help remittances though.
No it should not. Inflation will kill people who cannot eat BBS stats for lunch or dinner.
Our lazy, dumb entrepreneurs should focus on innovation and efficiency and arrest personal greed (by cashing out and hoarding less, reinvesting more) rather than get the government to make dollar cheaper at the expense of triggering double digit inflation in food prices due to heavy import dependency.
While I personally benefit immensely from taka depreciation, Bangladeshi people in general cannot afford it until we manage to stop our heavy reliance on imports for essential products especially food.
 

UKBengali

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LOL.

So in the past month the Taka has gone from 82 to a single dollar to 85.

This is perfectly within the range of currency fluctuations and no sign of any imminent free-fall in the value of the currency.
 

Destranator

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All of this is consequence of heavy borrowing from international market. When previously i mentioned sideeffects of boosting reserves via borrowing some Bangladeshi friends went bat $hit crazy. Bangladesh is reaching a tipping point in term s of borrowing and spending where they will see a free fall of Takka as a result shrinkage of reserves and gdp in dollar terms. There is still time as bangladesh can strap its belt tight rather than be a glutton for foreign borrowed dollars. Pakistan fell in same pit and now we are suffering badly due to similar decisions made by consecutive PPP and PMLN govt.
While external borrowing does contribute to increase BD's reserves in the short term (at the expense of long term drainage), it is not the biggest contributor. Bangladesh's main deficiency is its negative balance of trade which keeps hovering around $10 billion. The deficit is compensated for by remittance dollars for the most part but this comes at the expense of massive increase in "free money (money printed against unbound remittance without any increase in local production of good and services)" supply triggering inflation. This in turn forces BB to maintain high interest rates which hurts local manufacturing businesses and therefore acts as a barrier towards growth of export oriented industries.
LOL.

So in the past month the Taka has gone from 82 to a single dollar to 85.

This is perfectly within the range of currency fluctuations and no sign of any imminent free-fall in the value of the currency.
I would prefer taka to keep hovering around that range to offer stsbility to the economy.
 

bluesky

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So in the past month the Taka has gone from 82 to a single dollar to 85.
"The value of the greenback, which crossed Tk 90 mark for the first time on Monday, further spiked by 20 paisa on Tuesday".

This is what is the present situation in the opening post and the actual value is Tk107.6 per dollar. This will shortly fall to Tk120 to a dollar, probably by December this year when BD will repay about $2.5 billion as against last year's $1.9 billion.


Please don't feel good by comparing it with Pakistan today. Compare Bd with Pakistan about 8 years back.
 
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Destranator

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The Real Effective Exchange Rate (REER) is already 107.6 Taka per dollar. The way I see it will fall to at least 120 Taka because this year another $2.5 billion (assumed, but last year it was $1.9 billion) will have to be repaid to the loan sharks.

Unless the GoB stops borrowing in two hands, there is a possibility of heavy inflation and a free fall of Taka. However, increased export and FDIs would help the situation.

You guys will not like to hear when I say there is no free lunch and no development with foreign money. Wealth must be produced inside the country that sustains the construction of infrastructure construction.

Today, the mind of deceased finance minister Saifur Rahman is more needed.
While some foreign borrowing is inevitable to support building non-existent basic infrastructure in many parts of BD, we should minimise costs of such projects as much as possible. Fancy initiatives such as paying foreigners to build another $12 billion dollar nuclear power plant or a second sattelite (while first one is hardly utilised) should be dropped immediately.
 

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