Bangladesh’s central bank is guarding against currency speculation amid declining dollar reserves, while simultaneously imposing austerity measures on the nation’s financial institutions.

Bangladesh Bank deployed 10 teams in Dhaka to inspect foreign currency transactions after some money changers charged as much as 112 taka per dollar on Tuesday, central bank spokesman Serajul Islam said by phone. That compares with the interbank exchange rate of 94.7 taka against the greenback Wednesday.

Speculative trades in the South Asian nation’s currency coincide with Dhaka approaching the International Monetary Fund for a loan and reflects concerns about the economy’s health, given regional neighbors Pakistan and Sri Lanka have also sought funds from the lender. Due to war-induced commodity price shocks, costlier imports are straining Bangladesh’s current account and foreign exchange reserves.

The central bank increased surveillance on “dollar transactions in the open market” and will continue the crackdown on hoarders of foreign currency, the spokesman said, adding that it is scrutinizing financial information availed from the money changers.

The forex pile slipped to $39.67 billion as of July 20 from $45.51 billion a year earlier, although it’s still enough to cover four months of imports. The trade deficit widened to a record $30.8 billion in the July-to-May period.

Separately, the central bank said financial institutions should cut spending on entertainment, travel, computers, electric appliances and furniture by half, in a notice published Wednesday. They must save at least 25% of funds allocated for electricity and fuel costs, according to the Bangladesh Bank.

Source:
courtesy of BLOOMBERG

by Arun Devnath and Ruchi Bhatia

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