The Bangladesh Bank yesterday devalued the taka against the US dollar to a large extent in order to cope with the pressure resulting from increased import payments and to encourage shippers.
The interbank exchange rate hit 86 Tk to the dollar yesterday for the first time, from $ 85.80 on Thursday, according to central bank data.
This has been a major depreciation of the local currency in recent years, said a Bangladesh Bank official.
The central bank typically depreciates the local currency between Tk 0.05 and Tk 0.10 per dollar for a particular business day.
The interbank exchange rate stood at 84.80 Tk on January 10 last year.
The local currency trades at over 90 Tk per USD in the edge market.
Ahsan H Mansur, executive director of the Bangladesh Institute for Policy Research, said it was the right move to adjust the imbalance facing the forex market.
He then urged the central bank to depreciate the local currency to at least Tk88 per dollar.
“I hope this is the first step in the BB’s efforts to depreciate the local currency, and the central bank will take it step by step to keep the market stable.”
A central bank official said the exchange rate was supposed to be determined by the market. But the BB occasionally intervenes in the foreign exchange market in the interest of the economy.
The local currency has come under pressure in recent months due to escalating imports and falling remittances.
In this context, the central bank regularly injected dollars into the market in order to contain the depreciation of the taka.
For example, banks have so far bought around $ 2.5 billion from the central bank during the fiscal year to pay their import bills. As a result, foreign exchange reserves decline.
Import payments stood at $ 31.16 billion between July and November, up 54% year-on-year.
Remittances fell 21% year-on-year to $ 10.23 billion in the first six months of the fiscal year.
The BB official said the depreciation of the local currency would discourage companies from importing luxury items while encouraging Bangladeshi expatriates to send their hard-earned money through the formal sector.
In addition, it will also give exporters a boost, he said.
Foreign exchange reserves stood at $ 44.36 billion on January 6 compared to $ 46.4 billion on June 30 of last year. It hit a record $ 48 billion in August.