Bangladesh and India decided to conduct trade settlements in their own currencies, bypassing the dominance of the US dollar. According to sources from the Bangladesh Bank, the decision came due to the foreign currency liquidity problems faced by Bangladesh, which are disrupting the flow of imports into the country.
Bangladesh and India conduct bilateral trade in national currencies
The governments of Bangladesh and India have decided to conduct bilateral trade settlements between them in national currencies, away from the dominance of the US dollar. According to local sources, the decision aims to protect the flow of imports to Bangladesh, which is currently facing liquidity problems in US dollars as a result of the effects of the Russian-Ukrainian conflict.
Moreover, this decision will also lower a series of costs related to the use of the US dollar, its conversion into Indian rupees and Bangladeshi takas. Muzbaul-ul-Haq, Executive Director, Bank of Bangladesh. advertiser:
India is a major trading partner of Bangladesh. Bangladesh imports a huge amount of goods from India. Thus, such a decision would lower the cost of doing business, speed up transactions, and boost regional trade.
According to the bank, Bangladesh imports nearly $14 billion worth of goods from India, and exports only about $2 billion.
implementation and effects
While the deal is meant to benefit Bangladesh, Bangladesh can only pay for Indian imports in rupees in the same amount it exports to India. But Al-Haq pointed out the importance of this agreement. He said:
We are always aware of how to cut the trading gap. In fact, Bangladesh is an import based country and India is one of the major countries from which we import. So, the decision will help in the long run for both countries.
Haq estimated that this process would begin in June, as banks in the two countries are already opening transaction accounts with their counterparties to facilitate settlements. Part of the cost-cutting benefits comes from avoiding the currency conversions that have to be done multiple times in traditional settlements.
The Reserve Bank of India introduced this form of compromise in its latest foreign trade policy guidelines, implemented on April 1, that allow countries under dollar pressure to pay for imports in Indian rupees.
Other countries have also replaced the use of the US dollar to settle bilateral trade transactions recently. Argentina decided to pay for Chinese imports using the Chinese yuan in order to protect its dwindling dollar reserves. Brazil has already completed its first yuan-based settlement with China, and the BRICS countries will discuss issuing a bloc-level currency to replace the US dollar.
What do you think about the trading of India and Bangladesh in national currencies? Tell us in the comments section below.
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