Bangladesh Bank has taken a series of measures in an effort to reverse a record slide in the value of the taka against the US dollar, but the moves appeared to be floundering, bdnews24.com reports.
The deteriorating situation has upended trade as businesses are requiring more Bangladesh Taka to buy the greenback for imports of goods amid a global price hike.
Some exporters had backed steps to devaluate the taka against the dollar as they earn in dollars and spend in taka, but now they have realised the mistake. They are counting losses to buy raw materials and capital machinery from the international market for production.
The banks are asking the central bank for dollar quite often amid a shortage while the Bangladesh Bank is trying to keep the flow normal.
The central bank is also trying to limit imports of luxury goods to keep the situation under control, but still the banks sold dollar at Tk 92 on Wednesday. Voyager, a money exchange, bought dollar at Tk 91.40 and sold at Tk 91.80. The inter-bank dollar exchange rate was Tk 86.20. For imports, the rate rose to Tk 86.25.
Bankers said the global price hike forced traders and others to spend more dollars than before on the same products and services, leading to a shortage. People spend in dollars also for travel and education.
Selim RF Hussain, managing director of BRAC Bank, said the US dollar became costlier due to a supply crunch against a boost in demand. “The exchange rate will fall once the demand drops,” he said, pointing to increasing imports and a hike in prices on the international market.
Former governor of the Bangladesh Bank, Salehuddin Ahmed also thinks an increase in imports has led to the current situation. “We need to import even to produce goods for exports. We also import finished goods. This has led to a negative balance of payment, which means the outflow of the dollar has outstripped the inflow.”
Latest data show Bangladesh paid more than $8.32 billion for imports in February, a nearly 50 per cent year-on-year increase. Exports and remittance inflow have also grown in the past few months, but the earnings are lower than exports. Bangladesh exported goods worth $4.76 billion in March. Expatriates remitted $1.86 billion that month.
This difference between exports and imports put pressure on Bangladesh’s foreign exchange reserves as well, pushing them down from $48 billion to $44 billion in a few months.
More than 70 per cent of the raw materials used by the readymade garment industry, the biggest exporting sector of the country, come from abroad. Now the businesses are facing losses as they have to spend more on buying dollars for the exports of the raw materials, said Mohammad Hatem, senior vice-president of Exporters’ Association of Bangladesh.
Shahidullah Azim, a vice-president of the Bangladesh Garment Manufacturers and Exporters Association, demanded the banks lower the difference between selling and buying rates of the US dollar. “The banks are making profits when we're facing difficulties due to an increase in production cost and shortage of gas.”
Serajul Islam, spokesman for the central bank, said they have sold over $960 million on the open market so far this year to keep the flow normal.
The Bangladesh Bank also ordered the banks to keep the cash margin at a minimum 25 per cent to open the Letter of Credit for imports of goods that are not considered urgently needed. “It will discourage import of luxury goods and ease some pressure on the dollar.”
Besides these, the government has offered expatriate Bangladeshis to invest unlimited amounts of money in the dollar bond. But the government needs to pay the interests in dollar, so it has lowered the interest rate to reduce the amount of dollars going out of the country.