United News of Bangladesh . Dhaka
Finance minister AMA Muhith Sunday apprehended that it might not be possible to keep the exchange rate of taka against US dollar at current level due to the sharp devaluation of the currencies of major trading partners.
‘We want to keep the value of taka [at the current level]. But, I think, it may not be possible any longer,’ he told reporters after a meeting with the Bangladesh Textile Mills’ Association at the finance ministry.
The exchange rate of currencies in the free-float market cannot be controlled, but the Bangladesh Bank sometimes uses its tools to adjust the prices.
Replying to a question, the finance minister said he would not go for any decision in this regard at the moment but would convene a meeting with the stakeholders soon – may be in the next 15-20 days.
Business leaders, particularly the exporters, have been demanding devaluation of the local currency, claiming that they were losing out while competing in the export markets amid sharp devaluation of currencies in the major competitor countries driven by global recession.
‘We’ll have to consider how the currencies of the trading partners are behaving,’ said the finance minister.
The Bangladesh Bank had adopted a cautious course regarding the exchange rate at the beginning of the global financial turmoil considering that the devaluation of taka would give an extra push to the price situation as the inflation rose as high as 11 per cent early last year.
However, the prices of imported commodities have come down by around 40-50 per cent while price of fuel oil dropped from its peak of $147 per barrel to $47 now.
‘Still, it’s difficult for the authorities now to devalue the local currency. Rather, there is a trend of taka appreciating further,’ a fund manager told UNB on condition of anonymity.
He said the currencies of the neighbouring countries like India, Pakistan and Sri Lanka depreciated heavily due to withdrawal of investment by the western economies from those countries. On the other hand, Bangladesh’s exposure to foreign investment has been very little.
Moreover, he added, the demand for the greenback in the local market has declined substantially due to sharp fall in commodity prices on the international market while the remittance inflow and export earnings have remained strong.
As a result, the fund manager said local commercial banks, mainly the government-owned banks, were recently depositing surplus foreign exchange to the Bangladesh Bank, causing appreciation of the local currency.
Available figures show that the inter-bank exchange rate of taka against the greenback remained stable for last two years, but in the last 2-3 months the taka appreciated by Tk 0.35 per dollar to Tk 68.90 as of Sunday.
The fund manager said that although the exporters and remitters would be under pressure, the importers were unlikely to be affected by any incidence of devaluation of taka at this moment with the declining commodity prices on the international market.
He said taka could depreciate only when imports would rise to boost demand for the greenback. ‘A lower interest rate on bank loans can help stimulate bank credit and increase imports,’ he said and stressed the need for careful expansion of bank credits.
The central bank in its latest Monetary Policy Statement for the January-June period said it would encourage commercial banks to expand credit to the productive sectors to support an economic growth target of 6.0 per cent during the current fiscal year.
Courtesy: newagebd.com
