Bangladesh Defense
Saif
Senior Member
- Joined
- Jan 24, 2024
- Messages
- 22,172
- Likes
- 9,869
- Nation
- Axis Group
Making tourists' dollars count
Bangladesh Bank (BB) through a circular on Sunday (October 25), has allowed hotels, resorts, restaurants, shopping malls, retail outlets and other establishments to retain up to 15 per cent of their foreign currency receipts from foreign visitors paying through internationally issued cards or other
Making tourists' dollars count
Bangladesh Bank (BB) through a circular on Sunday (October 25), has allowed hotels, resorts, restaurants, shopping malls, retail outlets and other establishments to retain up to 15 per cent of their foreign currency receipts from foreign visitors paying through internationally issued cards or other approved instruments. The remaining 85 per cent must be encashed in taka. This appears to be a routine adjustment to the central bank's foreign exchange regulations. But in an economy where every dollar earned or spent is a matter of concern, this decision deserves closer attention. For its implications extend beyond the balance sheets of the establishments concerned.
Notably, these are not exporters shipping goods abroad. They earn foreign currency by providing services or selling goods to visitors. A hotel accommodating a guest, for instance, may receive payment by international card. Earlier, those receipts had to be encashed in local currency. Now, part of the proceeds may remain in the hotel's foreign currency (FC) account with an authorized dealer (AD) bank. The retained money, however, cannot be spent at will. Its use is limited to legitimate foreign exchange obligations arising from current account transactions. What practical difference will that make? Consider a resort paying an overseas booking service or a hotel settling permissible expenses through its international card. It would be rather cumbersome if the establishment converted all its foreign currency earnings into taka and then had to purchase dollars afresh from a bank for those expenses. Repeated conversion may entail costs. In that case, allowing merchants to retain a portion of their earnings in hard currency is a sensible move. It gives them operational flexibility without permitting their earnings to escape the banking system.
However, one should not mistake this arrangement for a measure that will immediately increase dollar supply in the domestic foreign exchange market. In fact, the opposite may happen initially. Since up to 15 per cent of eligible receipts can remain in FC accounts instead of being encashed, that portion is not immediately liquidated. The rest, or 85 per cent, will be converted into taka. So, how does the economy benefit? The answer lies less in dollars sold today than in how much can be attracted to the formal banking system over time.The real benefit of this relaxation will be in encouraging businesses to bring more foreign currency earnings into the formal banking system rather than looking for easier options outside it. For when banking is inconvenient, some businesses may be tempted to use the kerb market or informal hundi channels. Such transactions deprive banks of foreign exchange and evade scrutiny. By incentivizing international card payments, BB is trying to make formal transactions more attractive.
There is also the question of developing the country's tourism economy. Going by Bangladesh Tourism Board figures, foreign visitor arrivals, including business travellers, dropped to 585,145 in 2025 from 633,094 in the preceding year. Easier foreign currency transactions may encourage local businesses to welcome more international visitors. But should anyone expect a banking circular alone to draw tourists in droves? Certainly not. Poor visitor facilities cannot be remedied by relaxing banking rules. However, this facility must not turn into another loophole for misuse. The AD banks have been asked to ensure deduction and payment of applicable taxes and value-added tax (VAT), proper overseas card acceptance facilities and compliance with Know Your Customer (KYC), anti-money laundering and countering financing of terrorism (AML/CFT) rules. These safeguards are necessary. But that should not mean creating bureaucratic hurdles that defeat the purpose of the relaxation. Banks need to be able to distinguish genuine international transactions from regulatory evasions.
BB's decision is a welcome departure from restrictive foreign exchange management. Similar practical relaxations should be considered for businesses in international trade, hospitality and entertainment, subject to oversight. The government, too, needs to improve tourism infrastructure and visitor services. For foreign currency cannot be earned simply by changing the rules for keeping it. There must first be more foreign visitors willing to come here and spend their dollars.
Bangladesh Bank (BB) through a circular on Sunday (October 25), has allowed hotels, resorts, restaurants, shopping malls, retail outlets and other establishments to retain up to 15 per cent of their foreign currency receipts from foreign visitors paying through internationally issued cards or other approved instruments. The remaining 85 per cent must be encashed in taka. This appears to be a routine adjustment to the central bank's foreign exchange regulations. But in an economy where every dollar earned or spent is a matter of concern, this decision deserves closer attention. For its implications extend beyond the balance sheets of the establishments concerned.
Notably, these are not exporters shipping goods abroad. They earn foreign currency by providing services or selling goods to visitors. A hotel accommodating a guest, for instance, may receive payment by international card. Earlier, those receipts had to be encashed in local currency. Now, part of the proceeds may remain in the hotel's foreign currency (FC) account with an authorized dealer (AD) bank. The retained money, however, cannot be spent at will. Its use is limited to legitimate foreign exchange obligations arising from current account transactions. What practical difference will that make? Consider a resort paying an overseas booking service or a hotel settling permissible expenses through its international card. It would be rather cumbersome if the establishment converted all its foreign currency earnings into taka and then had to purchase dollars afresh from a bank for those expenses. Repeated conversion may entail costs. In that case, allowing merchants to retain a portion of their earnings in hard currency is a sensible move. It gives them operational flexibility without permitting their earnings to escape the banking system.
However, one should not mistake this arrangement for a measure that will immediately increase dollar supply in the domestic foreign exchange market. In fact, the opposite may happen initially. Since up to 15 per cent of eligible receipts can remain in FC accounts instead of being encashed, that portion is not immediately liquidated. The rest, or 85 per cent, will be converted into taka. So, how does the economy benefit? The answer lies less in dollars sold today than in how much can be attracted to the formal banking system over time.The real benefit of this relaxation will be in encouraging businesses to bring more foreign currency earnings into the formal banking system rather than looking for easier options outside it. For when banking is inconvenient, some businesses may be tempted to use the kerb market or informal hundi channels. Such transactions deprive banks of foreign exchange and evade scrutiny. By incentivizing international card payments, BB is trying to make formal transactions more attractive.
There is also the question of developing the country's tourism economy. Going by Bangladesh Tourism Board figures, foreign visitor arrivals, including business travellers, dropped to 585,145 in 2025 from 633,094 in the preceding year. Easier foreign currency transactions may encourage local businesses to welcome more international visitors. But should anyone expect a banking circular alone to draw tourists in droves? Certainly not. Poor visitor facilities cannot be remedied by relaxing banking rules. However, this facility must not turn into another loophole for misuse. The AD banks have been asked to ensure deduction and payment of applicable taxes and value-added tax (VAT), proper overseas card acceptance facilities and compliance with Know Your Customer (KYC), anti-money laundering and countering financing of terrorism (AML/CFT) rules. These safeguards are necessary. But that should not mean creating bureaucratic hurdles that defeat the purpose of the relaxation. Banks need to be able to distinguish genuine international transactions from regulatory evasions.
BB's decision is a welcome departure from restrictive foreign exchange management. Similar practical relaxations should be considered for businesses in international trade, hospitality and entertainment, subject to oversight. The government, too, needs to improve tourism infrastructure and visitor services. For foreign currency cannot be earned simply by changing the rules for keeping it. There must first be more foreign visitors willing to come here and spend their dollars.
