Bangladesh Bank Spokesperson and Executive Director Mejbaul Haque said, "We maintain accounts with central banks of different countries of the world."
"Yuan is our official approved currency. It has not been opened so far. Now we want to open this account. But the timeline when this account will be opened cannot be said now. But the process has progressed", he added.
Experts say that one of the objectives of this initiative is to repay the debt of Rooppur nuclear power plant through China. As a result, bankers believe that the dependence on the dollar will decrease. Because foreign exchange pressure will not fall on the dollar when other currencies can be traded.
Bangladesh account elsewhere in the world?
Bangladesh Bank currently has accounts in central banks of 11 countries, including the Federal Reserve Bank of New York, Bank of England, Switzerland, Japan, Australia, India, Italy, France. Transactions of various commercial banks are settled through 'Nostro' account.
HSBC is mostly used to settle transactions with China.
From 2022, Bangladesh Bank offers the opportunity to open accounts in Chinese currency Yuan.
Due to the acute dollar crisis, the issue of using alternative currencies in foreign trade came into discussion.
The currencies of five countries around the world have been recognized as 'high value currencies' by the International Monetary Fund or IMF. The Chinese Yuan is one of them. The yuan was admitted to the IMF's currency basket in 2016. Since then, the yuan has become stronger than ever as a currency in the IMF's review.
However, most of the transactions in Bangladesh are done through the Federal Reserve Bank of New York, the central bank of the United States. Most of Bangladesh's foreign exchange reserves are kept there. 'SWIFT' is the only way to send foreign currency settlement message from Bangladesh to any other country. Bangladesh still uses Society for Worldwide Inter-Bank Financial Telecommunication-TE (SWIFT).
A few major economies outside of the US and Europe were already trying to trade in alternative currencies, reducing the impact of the dollar. Russia and China are the most advanced in this field. From July last year, the system of direct transactions with India in Rs. Since 2016, Russia has been trying to connect Bangladesh to the Financial Messaging System (SPFC), its central bank's transaction messaging system.
Why is the importance of the yuan?
Russia's loaned nuclear power plant project in Rooppur, Bangladesh, has become complicated with the repayment of its loan installments after the Corona crisis. Since the start of the Russia-Ukraine war in 2022, the US and Europe have imposed various sanctions on Russia. The main purpose of these sanctions was to narrow the path of economic transactions in Russia. As a result of the US sanctions, repayment of the loan taken by Bangladesh for the initial work of the Rooppur nuclear power plant project has also been hampered.
After the war, the dollar came under heavy pressure. Many countries, including the United States, raise interest rates to control inflation. A lot of dollars flowed into the United States from countries around the world. In Bangladesh, the dollar which was 84 taka in 2021, now has to be bought at 117 taka from 117 taka. And according to the agreement of Rooppur nuclear power plant, the interest installment of the first phase of the loan was being paid in dollars.
As a result of this war, Western countries expelled Russia from SWIFT, the international financial transaction network, in 2022. As a result, Bangladesh is in trouble with debt repayment. Bangladesh took a loan of $1,138 million from Russia for the Rooppur project. The repayment of the loan is scheduled to start from March 2027. As per the terms of the agreement, Rooppur's loan will be repaid in 28 years with a grace period of 10 years.
As a result, the country owes about 400 million dollars to Sonali Bank by opening a 'Scrow' account and depositing it there. In a global context, Bangladesh and Russia decided to repay their debt in yuan, an alternative currency to the dollar. which is known as the globally recognized Chinese Network Cross Border Inter-Bank Payment System (CIPS).
This initiative is being taken to repay Russia's debt by opening an account in China's central bank and joining the country's transaction system. In this context, a protocol agreement was signed in April 2023 to pay Ruppur's debt through the People's Bank of China instead of paying it to Russia.
A delegation of Bangladesh Bank visited the country at the invitation of China in the first week of this March. At this time, the delegation held a meeting with the People's Bank of China, the central bank of China. At the same time, there was a discussion about opening an account in that bank and joining the 'The Cross-Border Inter-Bank Payment System' (CIPS) as a means of sending transaction messages.
Bangladesh Bank spokesperson Majbaul Haque said, “Every central bank has some process for opening accounts. We have many with us. We also have many banks. The process of opening an account at the Central Bank of China has already started. But the timeline cannot be said right now.”
However, he claimed that the opening of this account has nothing to do with the loan repayment of Rooppur power plant project. “The central bank's relationship with the central bank is not due to any specific account. Accounts are opened for overall reasons. It has nothing to do with it", he said.
Trade relations of Bangladesh with China:
Bangladesh imports the most products from these two countries, China and India. But exports are very low in both countries. But 85 percent of the total export income comes from the United States and the European Union. According to the data of Bangladesh Bank, in the financial year 2022-23, the import from China is 1 thousand 783 million dollars. Which is 26.10 percent of total import. But only 68 million dollars have been exported to the country. In the previous financial year, the import from the country was 288 million dollars. Which was 26.50 percent of the total import. And export earnings came in at less than a billion dollars.
Bankers say there is a basket of five world currencies. Internationally recognized trade transactions can be done through them. However, the influence of the dollar over other foreign currencies is still high. These recognized foreign currency reserves are kept in the account of the central bank of one country with the central bank of another country. When Bangladesh opens an account in another country's bank, it is called a 'Nostro' account. And the account that other countries open in Bangladesh is called 'vrost' account. Transactions are completed through these accounts.
“The main thing here is that dependence on the dollar will decrease. When I trade in another foreign currency, the pressure of that foreign currency does not fall on the dollar." "This way it can be shifted to different currencies. Any Central Bank can make such conversions”.
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