BB governor rules out necessity of emergency fund to stabilize market

Bangladesh Bank Governor Dr. Ahsan H. Mansur believes that if financial security is ensured within the country, a significant portion of illicit fund transfers abroad can be prevented.

He emphasized that political stability is essential to achieve this goal.

He made these remarks on Thursday (May 22) at a discussion titled “Application and Impact of Market-Based Exchange Rate” organized by Bonik Barta at a prominent hotel in Dhaka.

According to Dr. Mansur, the country’s economic situation is gradually improving compared to July–August of last year. Foreign investors who wish to repatriate their funds are not being obstructed, and inflation is expected to fall to around 7–8% soon.

He also noted that hoarding dollars in anticipation of a steady rise in its value would not be fruitful. In addition, he advised banks to introduce more benefits and facilities for remittance-sending expatriates.

Economists and business leaders participating in the event recommended creating a $1 billion emergency fund to stabilize the foreign exchange market. However, the Governor dismissed the need for such a fund, stating confidently that “not even a dollar will be needed.”

It has been almost a week since the central bank, following IMF advice, allowed the exchange rate to be determined by market forces. Although there have been some fluctuations in the open market during this period, the exchange rate has remained stable and manageable within the banking system, alleviating earlier concerns.

Commenting on the dollar’s open market rate, Syed Mo. Kamal, Country Director of Mastercard, said, “We want to see a stable market. Right now, demand for the dollar is low, and remittance inflows during Eid will further increase supply. This will help stabilize the market. Reserves could reach $2.6 billion by the end of the month, and a $500 million support buffer is already in place.”

Masrur Reaz, Chairman of Policy Exchange, recommended raising the emergency reserve from $500 million to $1 billion.

Mahbubur Rahman, Managing Director of Mutual Trust Bank, pointed out that U.S. tax policies could impact remittance inflows. Therefore, the government must develop strategies at the central level to assist expatriates in sending money through legal channels.

Currently, import demand is low. However, to address LC (Letter of Credit) issues and maintain a steady supply chain, Uzma Chowdhury, Finance Director of RFL Group, recommended proactive planning.

She further stressed that banks must openly declare their exchange rates so that the spread in the market is transparent. The central bank, she said, must also ensure transparency in this regard.