The Bangladesh Bank has allowed further devaluation of the taka against the US dollar with the interbank exchange rate of the greenback increasing to Tk 84.90 on Thursday.
BB sources said the central bank made the move with a view to increasing competitiveness of the country’s exporters.
Dismal export earnings in four months (July-October) of this fiscal year of 2019-2020 prompted the central bank to allow further devaluation of the taka, BB officials said.
In June-October of FY20, the country’s export earnings fell by 6.82 per cent to $12.72 billion from $13.65 billion in the same period of FY19. Export earnings fell in last three months in a row, starting from August.
The country’s export income witnessed a negative growth for three consecutive months for the first time in recent years as the major economies in the world were facing recession warnings amid the US-China trade war.
As per the BB data, the interbank exchange rate of the dollar increased to Tk 84.90 on Thursday, rising in phases from Tk 84.50 on October 3 this year.
However, the dollar was trading at around Tk 86.9 at the curb market on Thursday.
The interbank exchange rate of the greenback was stable at Tk 84.5 from May to September.
Since January, 2017, the interbank exchange rate of the dollar devalued by 7.88 per cent or Tk 6.2. Although the taka was devalued against the US dollar, injection of the US dollar in the country’s local market was lenient, which indicates that the devaluation was intentional, said BB officials.
They said that the central bank allowed further 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.
Till Sunday, the BB in the current fiscal year injected $290 million in the local market whereas 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.
Policy Research Institute executive director Ahsan H Mansur told New Age on October 13, ‘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 further 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.
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.
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