National, Front Page

Money changers behind dollar crisis

Published : 05 Aug 2022 10:13 PM

Mushroom growth of money exchange houses has appeared as a major cause of foreign exchange crisis as they sell and buy US dollars randomly without proper documents.

Although Bangladesh Bank has imposed a cap on sale and purchase of US dollars for money exchange houses, anyone can buy any amount of dollars without any kind of papers.

According to BB policy, a customer now can sell $5,000 and buy $1,000 against a valid passport in one year, an owner of money exchange told Bangladesh Post.

Market analysts said money exchange houses directly help smugglers who launder money abroad or reserve dollars by converting black money.

Besides, money exchange houses help Hundi transactions that reduce remittance in the country, they added.

However, the central bank has recently taken strict measures including forming a monitoring committee to prevent volatility in the price of the dollar in the curb market, an official of the central bank said.

If any central bank team finds, during inspections, any exchange house’s involvement in the manipulation of the dollar price, their licence will be cancelled, he added.

Md Serajul Islam, Bangladesh Bank Executive Director and spokesman, told Bangladesh Post the central bank has taken all-out measures to make the country’s foreign exchange market stable. 

The central bank warned money exchange houses that their licences would be cancelled if they manipulate the price of the US dollar.

“The Central Bank has monitored the foreign exchange houses and audited them for some time as they are doing business as per law,” he mentioned.

Economists said the Bangladesh Bank cannot control the foreign exchange market even after intervening.

They said the government should make a new policy for money exchange houses, which helped the rising greenback in the forex market as well as rising remittance by reducing ‘Hundi’ transactions.

AKM Ismail Haq, president of The Money Changer Association of Bangladesh, told Bangladesh Post, “Legal money exchanges are maintaining terms and conditions of the Central Bank, but illegal money exchanges do not maintain any rules. Day by day, legal money exchange houses are reducing to stand at about 234 while mushroom growth of illegal money exchange houses has been witnessed across the country to stand at around 1,000.”

Due to illegal money exchange houses, huge money launderers abroad who create a dollar crisis in the country, he said, adding that they open different branches across the country for doing business without maintaining rules and regulations. That is why they are doing well, but legal money exchange houses face huge losses.

Hafizur Rashid Fakir, the owner of Bijoy Money Exchange, told Bangladesh Post, money exchange shops can buy $5,000 and sell $1,000 to a customer for a year with valid passport, visas and tickets. 

According to rules, a money changer house can keep a maximum of $25,000, he added.

He urged the government to increase the limit for selling and buying up to $5,000 from $1000 and $10,000 from $5,000.

Besides, the government will make a new  policy to support a money changer house and increase the limit of a maximum of $1,00,000 in money exchange’ own reserve, which will help reduce money laundering, he mentioned. 

If the government gives permission for some additional services to money exchange houses like small drafts, pay orders, TC (Traveler check), small L/Cs and so on, it will be a relief for banks and forex market from dollar crisis, Fakir said, adding that it will also help for stopping ‘Hundi’.

DrZahid Hussain, former lead economist of the World Bank, told Bangladesh Post, “The Central Bank has fixed dollar rate each and every day, but they cannot control the forex market. They should leave the dollar rate as per market demand.”

Bangladesh Bank cannot control the foreign exchange houses to limit their transactions, he said, adding that the Central Bank should make rules and regulations in reality in the market.

 DrMonzur Hossain, Senior Research Fellow of Bangladesh Institute of Development Studies (BIDS), told Bangladesh Post, “Most of the money exchange houses do illegal transactions. The Central Bank should properly monitor them and create market supportive-rules for them to control the forex market by reducing the dollar crisis.”  

However, many bank officials also work as brokers of money exchange houses, said an official of money exchange houses.

He said they are buying and selling millions of dollars from the money exchange houses to make more profit.

That is why the Central Bank cannot control the forex market, he mentioned.

If the central bank makes market-supportive rules for foreign exchange houses, foreign exchange market will get a huge dollar supply which will help to remove the dollar crisis.

Meanwhile, the Central Bank is selling huge amounts of US dollars to the commercial banks to meet higher import payments.

Bangladesh Bank sold a record of $7.62 billion directly to commercial banks from the foreign exchange reserves to stabilize the forex market in the just-concluded 2021-22 fiscal year.

Market analysts said the Central Bank has never released such a high amount in the history of Bangladesh in a fiscal year.