Narrow gap in dollar buy- sale rates

Apparel exporters have demanded that the government fast narrow down the gap between the rates at which the US dollar is bought and sold, citing that they were incurring losses for volatility in the exchange rate. 

The local garment exporters demanded that the gap be a maximum of one taka, saying that banks were doing brisk business giving the excuse of a scarcity of dollars in the market.

Last week, the Bankers Association of Bangladesh and the Bangladesh Foreign Exchange Dealer's Association (BAFEDA) declared the exchange rate on export receipts at Tk 102 per dollar from Tk 101.

However, the same exporters are having to buy each dollar at Tk 107 from banks if they wanted to open letters of credit (LCs) for importing raw materials, capital machinery and other products.

This means the banks are getting Tk 5, said the garment exporters, adding that this was "discriminatory".

The gap should be at best Tk 1 per dollar, said Faruque Hassan, president of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), and Mohammad Hatem, executive president of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA).

The local garment exporters demanded that the gap be a maximum of one taka, saying that banks were doing brisk business giving the excuse of a scarcity of dollars in the market

It is true that a rise in the exchange rate was a bit beneficial for exporters but still the gap is too high for exporters and importers, said Hassan.

Because, of the total export value of the garment items, some 70 per cent goes behind importing raw materials, he said.

So, a big chunk of the profit from the export receipt is being taken away by the banks which should not be in the greater interest of the long-term sustainability of the businesses, added Hassan. 

Narrowing the gap will be a business-friendly decision during this volatile time, he added.

Hassan also urged the government to retain the interest rates of 6 per cent for deposits and 9 per cent for lending in the banking sector during these volatile times.

If the bank interest rate cap is withdrawn, the cost of funds for investment will also go up. As a result, entrepreneurs will feel discouraged from going for making investments, he said.

Hatem said the banks were taking away Tk 5,000 crore from the garment exporters through the "discriminatory" exchange rate as the gap was too high.

"I have protested such a high gap for several times, but without any fruition," he said.

The exchange rate for remittance is Tk 107 per dollar which is also "discriminatory" towards the exporters, he said.

The banks are paying Tk 107 to remitters and the same banks are paying Tk 102 to the exporters for a dollar, which is also not fair, he added.

The prevalence of several exchange rates has been turning the market more volatile, he said.