Massive import payments by Bangladeshi commercial banks against letters of credit (L/Cs) for capital machinery, foodgrains, fuel and fertiliser have put pressure on country's foreign exchange market.

As a result the country's state-owned and private commercial banks have decided to up their dollar rates to new highs between 63.51 taka (Tk63.51) and Tk63.80 respectively.

Dollar shortfall

Bankers say the state-owned banks were selling dollars at Tk59.95 and private banks at Tk 62.50 at the start of this year.

Now they say that both local and foreign banks have been facing difficulties to meet the demand of the importers due to dollar shortfalls over the past month.

Reasons

Import payments have risen significantly in the past three months following last year's devastating floods while export earnings have not matched the outflow of foreign exchange.

Other factors creating pressure on the market include a slight fall in the remittances from Bangladeshis working abroad and multi million dollar imports by multinational companies buying in capital equipment for investments in the telecommunications and power sectors.

L/Cs blamed

A senior central banker has denied that the forex hikes are caused by Bangladesh Bank's policy of keeping 50 per cent of the commercial banks' foreign currency with the central bank and treating it as a safe reserve for them.

Instead the official blamed the situation on the "negligence" of commercial banks, suggesting that they did not exercise due diligence while opening L/Cs for imports. He did not elaborate.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.