The value of the Bangladeshi Taka is witnessing a downward trend against the US dollar, causing financial distress for businesses and having economic implications. The current interbank exchange rate is Taka 111 per dollar, while some banks are receiving remittances at rates as high as Taka 117 per dollar, and the open market is trading at Taka 121 per dollar. This situation has led to a rise in import expenses and challenges in obtaining foreign currencies.
Measures Taken to Counteract the Depreciation
In response to this situation, the Bangladesh Foreign Exchange Dealers Association (BAFEDA) and the Association of Bankers, Bangladesh (ABB (ST:ABB)) allowed a 2.5% increase in the dollar purchase rate from remitters on October 22. However, with the Taka’s value continuing to fall, these organizations raised the dollar purchase rate from exporters to Tk 110.5 on October 31 and implemented regulatory checks on banks’ records.
Despite these actions, claims of overpriced rates and dollar shortages led banking institutions to limit the exchange rate at Tk 115 per US dollar for transactions by Bangladeshi workers abroad on November 7. This decision was made despite previous offers of up to Tk 124.
Impact on the Economy
The ongoing crisis in the foreign exchange market is worsened by a 4.3% year-on-year drop in remittance inflow to $6.8 billion in July-October 2023-24, even with government incentives for remitters. Over the last 27 months, the central bank’s withdrawal of over US $25 billion from its reserves in an effort to stabilize the foreign exchange market has failed to compensate for a slow inflow of remittances and export earnings, resulting in a reduction of foreign exchange reserves.
Between September 2021 and September 2022, during a dollar crisis and a mismatch in dollar supply and demand, the Taka depreciated from Taka 85.5 per dollar to Taka 96 per dollar. This depreciation increased debt repayment obligations due to US-denominated foreign debt, leading to additional economic implications.
In conclusion, the depreciation of the Taka and the ensuing dollar crisis is detrimental to the economy. It not only increases the financial burden on businesses but also impacts the country’s foreign exchange reserves. This situation, if not addressed promptly, could lead to severe economic repercussions. (Source)