Bangladesh's central bank has injected more than US$1 billion into the country's commercial banks to help them cope with demand for the US dollar, which they mainly need to settle import letters of credit (L/Cs).

Support from Bangladesh Bank (BB) follows in the wake of a sharp reduction in the country's foreign exchange reserves and a significant depreciation of the Bangladeshi taka.

State support

So far, BB has pumped US$1.02 billion into the commercial banking sector, mainly to settle outstanding L/Cs for imports of petroleum products, grain, fertiliser and power plant equipment.

The central bank says it has provided most support for Bangladesh's state-owned commercial banks, providing them with nearly US$900 million in overdraft facilities since December 2010.

Currency pressures

During May, Bangladesh's foreign exchange reserve shrank to US$10.43 billion from US$11.316 billion.

Meanwhile, the taka has depreciated against the US dollar by around 0.84 per cent just in the last month.

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