The Bangladesh Bank has started allowing devaluation of the taka against the US dollar after a five-month lull to support exporters as the country’s export earnings witnessed a fall in July-September this fiscal year (2019-20) amid a slowdown in the global economy.
As per the Bangladesh Bank data, the interbank exchange rate of the dollar increased to Tk 84.7 on Sunday, rising in two phases from Tk 84.5 on October 3 this year.
The rate was stable at 84.5 since May 3, 2019.
If Sunday’s interbank exchange rate was taken into consideration, the taka was devalued by 7.62 per cent against the US dollar since January, 2017 when the dollar was traded at Tk 78.7.
Although the taka was devalued against the US dollar, injection of the US dollar in the country’s local market was lenient, which indicated that the devaluation was intentional, said BB officials.
They said that the central bank allowed devaluation of the taka following requests from the banks, taking the drop in exports in the first quarter of the current fiscal year into consideration.
In recent days, the US dollar has been traded at up to Tk 87 at the curb market.
Till Sunday, the BB in the current fiscal year injected $89 million including $30 million injected in 13 days of October. The monthly average injection was $195 million in last fiscal year (2018-2019).
In total, the BB injected $2.34 billion in last fiscal year.
Earlier on October 7 this year, BB governor Fazle Kabir at an event said that the country had already started getting the benefits of the newly introduced policy to issue 2 per cent incentive against inward remittance while there were incentives in place for exporters as well.
‘Taking the situation into consideration, we do not think there should be any need for devaluation of the taka,’ he mentioned.
Policy Research Institute executive director Ahsan H Mansur, however, told New Age, ‘Devaluing the taka has become very much vital to keep our exporters competitive in the global market.’
‘And, we hope that the BB would allow devaluation of the taka,’ he said.
For instance, India and China have already devalued their currencies by around 10-15 per cent, said Mansur, also the chairman of BRAC Bank.
Only Tk 0.20 devaluation would do nothing if the devaluation of currencies in those countries, which are Bangladesh’s export competitors, is taken into consideration, he said, adding that the BB should allow further devaluation of the taka.
However, the central bank is very slow and late in responding, Mansur said.
In reply to a question whether more devaluation of the local currency would impact the country’s inflation negatively, he said the impact would be insignificant.
In the first quarter of FY20, the country’s export fell by 2.94 per cent year-on-year to $9.64 billion from $9.94 billion in the same period of FY19.
In FY19, the export earnings increased to $40.53 billion from $36.66 billion in FY18.
The country’s import increased to $54.64 billion in FY19 from $51.53 billion a year before.
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