Bangladesh Cracks Down on Money Changers to Curb Dollar Crunch

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(Bloomberg) — Bangladesh is cracking down on money changers as a shortage of dollars pushed the taka to a record low and forces trade to the so-called kerb market.

The central bank has suspended the licenses of five money changers and served notice on 42 others, citing alleged manipulation of the exchange rate.

“Next steps will follow after Bangladesh Bank receives responses from the money changers,” central bank spokesman Serajul Islam said by phone Tuesday.

While Bangladesh has enough foreign currency to pay for four months of imports — slightly higher than the recommended three-month cover — it has sought a loan from the International Monetary Fund in what authorities say is a pre-emptive measure. The taka has lost more than 10% of its value over the past year and fell to a record 94.79 per dollar on Aug. 1, according to data compiled by Bloomberg.

The crackdown began after some money changers charged as much as 112 taka per dollar on July 26, Islam said. Ten teams have since inspected 80 money changers across the capital city Dhaka to investigate whether they hoarded dollars to rig the currency market, he said.

Foreign exchange reserves in Bangladesh slipped to $39.67 billion as of July 20 from $45.51 billion a year earlier. The country’s trade deficit widened to a record $33.3 billion in the fiscal year ended June.

Bangladesh has also announced a series of austerity measures, including curbs on the imports of luxury goods, to preserve dollars.

On Tuesday, Prime Minister Sheikh Hasina’s administration suspended state-owned Teletalk’s $25 million 5G telecom plan, saying the company needs to import almost 80% of equipment for the project, “which is not necessary at this moment.”

©2022 Bloomberg L.P.