Bangladesh Bank’s dollar purchasing spree slowed in January as demand for the greenbacks from businesses rose in the month amid a gradual increase in imports.
The latest BB data showed that the central bank purchased $388 million in January against its monthly average purchase of $916 million in the July-December period of the fiscal year of 2020-2021.
At the end of January of FY21, the BB’s purchase of the currency reached $5.878 billion from $5.49 billion in the July-December period of FY21, the data showed.
As an import dependent country, demand for the dollar on the local market is a major indicator of Bangladesh’s business sentiment.
The central bank that usually injects US dollars into the market to fulfil the market demand and to keep the exchange rate stable resumed purchasing dollars from the local market in March, 2020 after being on the selling spree for more than three years since January 4, 2017.
Since March 2020, the central bank has been purchasing dollars as banks are rushing to the BB to get rid of excess dollars in their hands.
The COVID-19 outbreak that began in the country on March 8, 2020 was the major reason for the drastic decline in imports by the country’s businesses.
Apart from the dollar market situation, the country’s import payments increased to $4.99 billion in December, 2020 against $3.91 billion import in July, 2020.
The January import data is yet to be available.
The country’s import payments were $3.52 billion in August, $4.3 billion in September, $4.04 billion in October and $4.46 billion in November 2020.
Policy Research Institute executive director Ahsan H Mansur told New Age on Monday, ‘A decline in the BB’s US dollar purchasing from the country’s local market and the improvement in import payments suggest that the country’s economy is slowly picking up pace.’
‘It’s a positive sign but the recovery cannot be mentioned as a significant one,’ he said.
With a gradual increase in imports, the BB’s dollar purchasing from the local market would decline further, Mansur said, adding that the trend suggests that the central bank has remained firm with its policy to keep the exchange rate of the dollar stable against the taka.
Mansur, also the chairman of BRAC Bank, said that the country’s reserve build-up would slow in the coming days with the gradual increase in import payments and the lower purchasing of dollars by the BB.
The economic activities would be restored to the pre-COVID-19 outbreak level when the country’s import payments would exceed $5 billion with a private sector credit growth of around 14 per cent, he said.
BB officials said that the high reserve growth rate the country observed during the severely-impacted period of coronavirus outbreak in 2020 would not be seen in the coming days as the country’s reserve has been hovering at $43 billion since December 30, 2020.
On Sunday, the country’s reserve fell below $43 billion after the payments of different import bills.
In the June-December period of the year 2020, the country’s reserve grew by $10 billion as a result of poor imports and surge in remittance inflow.
Along with the low imports, a major contributing factor for the country’s reserve build-up, the surge in remittance inflow also played a significant role in this respect.
The country’s remittance inflow reached a record $2.6 billion in July 2020, when the country’s import payments plunged drastically due to poor businesses and economic outlook mainly due to the outbreak of coronavirus.
In January, the country’s remittance inflow dropped below $2 billion mark after remaining above $2 billion since September, 2020.
Remittance dropped by Tk 747 crore or $85.05 million to $1.97 billion in January 2021 from $2.05 billion in the previous month.
Inflow of remittance was $2.15 billion in September and it dropped to $2.1 billion in October, $2.08 billion in November and $2.05 billion in December 2020.