To raise the supply of US dollars, the Bangladesh Bank recently asked banks to immediately convert major export earnings of businesses into taka. The rule will be applicable for the value-added portion of export earnings, i.e, export proceeds that are available to exporters after their import bills for back-to-back letters of credit have been met.

"It is observed that the value-added portion is not encashed into the taka immediately on the repatriation of export proceeds, resulting in delayed cash support to exporters for meeting working capital needs in the taka," the central bank said in a notice.

Banks had recently alleged that many exporters have not converted their dollars into taka as the local currency has weakened drastically.

The foreign exchange crisis intensified as exporters thought they would benefit more if US dollars are not converted immediately.

In Bangladesh, banks are allowed to retain repatriated export proceeds in a foreign currency in a single pool following the encashment of the local value-added portion. These funds are useable only for the settlement of back-to-back import payments of relative exporters.

In another notice, the Bangladesh Bank said exporters would have to sell their export proceeds to the banks through which they ship goods, according to media reports in the country.

Many exporters sell their export proceeds to banks that offer the higher rate. The new regulation will put an end to the practice.

Fibre2Fashion News Desk (DS)

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