Kazi Zahidul Hasan :
The central bank continues to sell dollar through banks in an attempt to contain dollar crisis in the market.
Officials attributed the falling remittance, surging imports and servicing of foreign currency dominated debt by the government to the dollar crisis.
From July 1 to December 28, Bangladesh Bank (BB) has sold US$1.2 billion to banks. In the last fiscal year, it sold $175 million and purchased $1.93 billion, show an official figure.
As the dollar shortage persists, Bangladesh currency (Taka) continues to weaken against the greenback putting an adverse impact on economy, said economists.
Officials said BB was in dollar buying spree since July 2012 to January 2017 to help prevent the sliding value of the greenback against local currency. But the situation now reversed and it goes to sell of dollar to control the prevailing dollar crisis in the market.
“Bangladeshi currency continues to face significant downward pressure as a result of dollar crisis. The pressure will persist in the months to come due to further widening of current account deficit,” economist Dr Zahid Hussain told The New Nation yesterday.
On Thursday, the inter-bank exchange rate of the US dollar stood at Tk 83.19, up from Tk 80.60 on July 2.
Dr Zahid Hussain said, “Dollar shortage has kept the exchange rate high. But sell of dollar cannot be the solution to ease the exchange rate volatility unless a combined structural reform is put in place. The government should work to maintain the current account balance and lessen trade deficit to ease the dollar crisis.
He apprehends that the falling value of local currency will make imported commodities costlier and fuel inflation further creating an adverse economic impact.
“I believe that the authorities will be broadly successful in keeping the exchange rate against the US dollar relatively stable to avert economic pain,” he added.
By the end of October this year, the deficit had moved up by $ 3.31 billion, or $ 44 million in the same period a year earlier, show a Bangladesh Bank data.
“The current account deficit is further widened during the first four months of the current fiscal year due to weak export earnings and rising import payments,” said a senior official at the Bangladesh Bank.
Between July and October, imports increased by 28.70 per cent year-on-year and exports by 7.63 per cent widening the current account deficit.
“Widening current-account deficit led to a much weaker currency. The government should take initiatives to increase export earnings in order to cope with the large current account deficit,” said former BB Governor Dr Salehuddin Ahmed.
He said the movement of value of local currency depends on capital flows with increase in foreign funds and investments. The depreciation of taka is expected to prevail in the months ahead due to external pressures. It will weigh on the authorities’ attempts to maintain exchange-rate stability.
Both the economists fear that a strong dollar for a persistent period could lead to weak corporate earnings, tighter credit, push up debt servicing liabilities and accelerate capital flight.
