Financial Market

Card-based forex transaction triples


A file photo shows a man counting US dollar notes at a currency exchange house in the capital Dhaka. Foreign currency transactions through cards tripled in the first quarter of the current financial year 2022-23 as an acute dollar shortage on the country’s financial market instigated travellers to use cards. — New Age photo

Foreign currency transactions through cards tripled in the first quarter of the current financial year 2022-23 as an acute dollar shortage on the country’s financial market instigated travellers to use cards.

The card-based foreign currency transactions hit Tk 1,546 crore in July-September of FY23 against Tk 465 crore in the same period of FY22, according to Bangladesh Bank data.

The foreign currency transactions through cards reached record Tk 584.8 crore in September following Tk 520.3 crore in August and Tk 440.9 crore in July.

However, the rise in foreign currency transactions through cards has also become a concern as it is also putting pressure on the currency market, bankers said.

In June and July of 2021, the foreign currency transactions through cards were Tk 125.3 crore and Tk 118.1 crore respectively.

The transactions crossed Tk 300 crore for the first time in May 2022.

Bankers said that people used foreign currency from their debit and credit cards mostly during their travels abroad.

Due to the intense dollar crisis on the market, travellers were not getting the greenback easily, they said.

Moreover, the exchange houses sometimes charge high from travellers, showing the poor dollar supply as a pretext.

So, they found it convenient to use dollars abroad for meeting their expenditures, the bankers said.

In addition, more and more people have found it safe and easy to use cards rather than bearing cash currency notes, they said.

Travellers use their foreign currency in their cards mostly for payment of plane fares and travel costs, hotel booking and to bear the shopping expenses, among others, they said.

As per Bangladesh Bank rules, each cardholder can spend up to $12,000 a year as their personal entitlement.

The central bank also suggested travellers using cards instead of searching for currency notes at high prices, the bankers said.

The country is struggling with the dollar crisis due to a record surge in trade deficit and lower remittance inflow.

Bangladesh’s trade deficit hit a historic high of $33.25 billion in the financial year 2021-22 amid a surge in imports and commodity prices on the global market.

The country’s import payments increased to $19.34 billion in July-September from $17.32 billion in the same months of the past year.

The foreign currency reserve in Bangladesh dropped to $34.30 billion on November 17 as the central bank has increased dollar sales to tackle the greenback crisis on the market.

According to a suggestion made by the International Monetary Fund, if the $8 billion used as an export development fund is excluded from the foreign exchange reserve, the reserve stands at $26.3 billion, the lowest in seven years.

The interbank rate of dollar has been hovering at Tk 103 in recent days after the BB approved floating rate of currency on September 14.

The card-based foreign currency transactions had surpassed Tk 250 crore for the first time in January 2020, but began to drop sharply amid travel restrictions due to the Covid outbreak worldwide.

The foreign currency transactions started rebounding strongly after July 2021 with relaxation of travel restrictions and the amount crossed Tk 250 crore in December 2021.

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