The taka faced less depreciation against the US dollar compared to other South Asian currencies in the last one year, eroding the export competitiveness of the country against its peers. This seems that Bangladesh has been trying to tackle the ongoing global economic crisis by strengthening its currency artificially but it may leave an adverse impact on the macro-economy, warn experts. The currencies of South Asian countries except the Maldives experienced a devaluation of between 6.06 per cent and 79.82 per cent in the past one year whereas the taka weakened by 3.18 per cent.
All currencies in South Asia, which consists of Afghanistan, Bangladesh, Bhutan, India, the Maldives, Nepal, Pakistan, and Sri Lanka, are now under pressure like other currencies in the rest of the world due to the global supply chain disruptions and pent-up demand. The pandemic has spawned the crisis and it has now been exacerbated by Russia’s invasion of Ukraine.
Among the countries, Sri Lanka is facing an acute foreign exchange crisis, which has already forced its prime minister to step down. Pakistan’s foreign exchange regime is witnessing volatility as well. Amid the volatile situation, the Bangladesh Bank is now giving all-out efforts to keep the foreign exchange market stable by weakening the local currency to some extent, ignoring the natural course of demand and supply.
The central bank has depreciated the taka five times this year, but the initiatives were not enough given the surging import payments, which have already generated a record trade deficit. Before the outbreak of the latest financial crisis, the central bank had not depreciated the taka significantly. The rate stood at Tk 84.80 per USD in May last year.
Bangladesh has tried to strengthen its currency artificially, so the ongoing global volatility has created enormous pressure on the taka. Before the outbreak of the latest financial crisis, the central bank had not depreciated the taka significantly. The peer countries of Bangladesh have been devaluing their currencies gradually over the years, whereas the BB has not followed the same path. The global financial trend is becoming worse day by day and we must be prepared to tackle the looming danger of economic recession.
