Bangladesh should reduce its overreliance on the U.S. dollar and increase the use of other currencies such as the Chinese renminbi (RMB) in international trade to ease pressure on the foreign exchange market, the companies said. .
The suggestion came after importers’ demand for US dollars surged in the domestic market to settle imports, sending foreign exchange reserves below $40 billion recently and pushing the value of the greenback up to 112 Tk per dollar recently from Tk 94 a few days ago.
“We have the option. We can use the Chinese currency at least for a temporary period to stabilize the foreign exchange market,” said Md Saiful Islam, president of the Metropolitan Chamber of Commerce and Industry.
Islam last week submitted a proposal to the governor of the central bank asking him to introduce the Chinese RMB as a second currency for settling international payments.
“It will help save a lot of dollars that can be used in normal times,” he said.
In fact, the central bank in 2018 allowed banks to open foreign currency clearing accounts with the BB in Chinese renminbi. Banks can open such accounts in US dollars, British pounds, Euros, Japanese yen and Canadian dollars as well.
The companies claim that many countries use the RMB in international trade because the currency has become convertible. Also, some countries like Bhutan and Nepal are already using the Indian Rupee as a second option to trade with India.
Companies’ recommendation to use RMB largely comes from the fact that China is the largest import destination for Bangladesh.
Bangladesh imports industrial raw materials, intermediate goods, spare parts, cotton, machinery, chemicals, and woven and knitted fabrics worth $15 billion a year.
Products worth $10 billion come from India.
According to Islam, the use of other currencies in international trade is temporary and not permanent.
Mohammad Ali Khokon, chairman of the Bangladesh Textile Mills Association, echoed Islam.
“There is nothing wrong with currency convertibility into RMB. It can be done for a temporary period to save the economy. RMB can be an option to maintain supply chain stability”
Textile millers are one of the biggest importers of Chinese products.
“We want the central bank to introduce RMB as a second option for international trade because we import a lot of goods from China,” said Mohammad Hatem, executive chairman of the Bangladesh Knitwear Manufacturers and Exporters Association.
Much of the RMB should be kept in the central bank vault for emergency use, he said.
“Exporters won’t lose a penny even if the RMB is used because the US dollar will determine the exchange rate,” he added.
Md Shahidullah Azim, senior vice president of the Bangladesh Garment Manufacturers and Exporters Association, says the RMB can be presented as a test.
He is, however, in favor of introducing the Chinese currency only to settle import payments, instead of opening it up to all other sectors.
Rizwan Rahman, president of the Dhaka Chamber of Commerce and Industry, said more currencies may be introduced for international business transactions as the dollar has become more expensive.
The RMB may be an option as Bangladesh has had an agreement with China since 2017 on the use of the currency, Rahman said.
He said Bangladesh imports nearly $15 billion worth of goods from China and exports about $1 billion worth of products.
Thus, the RMB can be used to settle import payments equivalent to at least $1 billion, Rahman said.
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