Photo : Collected
The dollar's exchange rate is surging like a runaway horse in the open market. Last Thursday, the market saw the price of the dollar surpassing Tk 126 per dollar, up from Tk 122 to Tk 123 just the previous Wednesday.
The rapid increase in the dollar's price in the open market began when it was announced that banks were purchasing dollars from foreign exchange houses at a rate exceeding Tk 122. Last week, it ranged from Tk 118 to Tk 120 per dollar. According to sources within the central bank, the dollar's price has never seen such a significant increase before.
Those concerned have said that anyone can buy dollars from the open market, while purchasing from a bank requires passport verification. This has led many people to acquire dollars from the open market and treat them as an investment, similar to the stock market, which is illegal.
The government is currently offering a 2.50 percent incentive for sending remittances through the banking channel. Additionally, the country's banks can obtain dollars sent by expatriates with an extra 2.50 percent incentive. Despite this additional incentive, the heat of the dollar market has not abated, with the exchange rate of the dollar against the taka reaching new record levels.
On Thursday, most money changers in the Dilkusha and Paltan areas of the capital were selling dollars at Tk 126.50 per dollar, marking the highest dollar price in the country's history. Customers had to pay Tk 126.50 to buy one dollar in the open market, a stark contrast to the Tk 120 to Tk 121 per dollar just a week ago.
A customer named Nazmul Islam informed the Daily Messenger that he required dollars urgently but couldn't procure them from the bank. Consequently, he resorted to the open market, where the dollar's price was exorbitant. As a result, he left without purchasing any dollars.
Previously, the dollar's price had peaked at Tk 120 in August 2022, following which it saw several months of decline. However, at the beginning of October this year, the dollar's price rose to Tk 120 in the open market. The dollar's price has now broken all previous records, reaching a new high of Tk 126.50.
Meanwhile, banks are not obliged to provide additional incentives. They may choose to offer this incentive when buying expatriate income. This new decision has had a positive impact on remittance flows, with expatriates remitting $197.75 crore in the recently concluded month of October, up from $134 crore in the previous month. This represents a $63.75 crore increase in expatriate income within a month.
Economists suggest that providing additional incentives may boost expatriate income slightly in the short term, but it is not a permanent solution. To address the issue comprehensively, the difference in the price of the dollar must be further reduced. There remains a significant disparity between the price of the dollar through the banking channel and the informal Hundi market.
Commenting on the situation, Ahsan H. Mansur, the Executive Director of the Policy Research Institute, said, “Bangladesh has exacerbated the crisis by maintaining the value of the dollar from the outset. As a result, expatriate income has flowed through illegal channels, with many not even repatriating export incomes to the country. But it hasn't helped; the price of imported goods has risen, and smuggling remains unchecked. To alleviate the pressure on the dollar, the market should determine bank loan interest rates."
Even with the additional 2.50 percent incentive offered by banks, the cost per dollar is estimated to be around Tk 116. However, ABB and BAFEDA have said that the price per dollar will not exceed Tk 115 with additional incentives. In contrast, the informal market has driven the dollar's price above Tk 126. As a result, analysts believe that expatriate Bangladeshis will not be incentivized to send remittances through legal channels.
Messenger/Sajib
