and capital flight :
THE New Nation reported that the central bank continues to sell dollar through banks in an attempt to contain dollar crisis in the market. Dollar crisis caused by free falling of remittance, surging imports, and servicing of foreign currency dominated debt by the government. From July 1 to December 28, Bangladesh Bank has sold US$1.2 billion to banks while in the last fiscal year, it sold US$175 million and purchased US$1.93 billion.
Meanwhile question arises as to why such dollar crisis emerged when under normal external payment situation the market was almost stable. Many believe that some vested quarters may have become active to move out big chunk of money from the country starting with the run up of election year next year. We have record level capital flight prior to and during last Parliament Election in 2014. Fearing political uncertainty and safety of their illegal fortune, these people may have become active again. We must say the central bank should open strong investigation and monitoring of informal dollar market to avoid big capital flight this time again.
As usual, as the dollar shortage persists, Taka continues to weaken against the greenback resulting in an adverse impact on economy. Now importers will have to pay more in local currency to buy dollar to settle import bills while exporters will get more in term of local currency that may encourage buyers of readymade garments to reduce rates. We must say this is a time for careful market monitoring and adjustment keeping eyes on protracting greater national interest.
The government must ensure remittance inflow through banking channels as higher dollar price may be a boon for expatriates and their families. What is more important is that the central bank must rein in the situation to arrest bigger volatility in currency market. Available data showed that the central bank was in dollar buying spree since July 2012 to January 2017 to help prevent the sliding value of the greenback against the local currency. But the situation now reversed and it goes to sell dollar to control the prevailing dollar crisis. On Thursday, the inter-bank exchange rate of the US dollar stood at Tk 83.19, up from Tk 80.60 on July 2. Economists said that dollar shortage has kept the exchange rate high but selling of dollar cannot be the solution. It needs a combined exchange rate adjustment in the short run and a structural reform in the medium to long run.
The current account deficit has been widened during the first four months of the current fiscal year due to weak export earnings and rising import payments. Between July and October, imports increased by 28.70 per cent year-on-year basis and exports by 7.63 per cent widening the current account deficit. Widening current-account deficit led to a much weaker currency. In our view the government should take initiatives to increase export earnings in order to cope with the large current account deficit and plug the loopholes for bigger capital flights.
THE New Nation reported that the central bank continues to sell dollar through banks in an attempt to contain dollar crisis in the market. Dollar crisis caused by free falling of remittance, surging imports, and servicing of foreign currency dominated debt by the government. From July 1 to December 28, Bangladesh Bank has sold US$1.2 billion to banks while in the last fiscal year, it sold US$175 million and purchased US$1.93 billion.
Meanwhile question arises as to why such dollar crisis emerged when under normal external payment situation the market was almost stable. Many believe that some vested quarters may have become active to move out big chunk of money from the country starting with the run up of election year next year. We have record level capital flight prior to and during last Parliament Election in 2014. Fearing political uncertainty and safety of their illegal fortune, these people may have become active again. We must say the central bank should open strong investigation and monitoring of informal dollar market to avoid big capital flight this time again.
As usual, as the dollar shortage persists, Taka continues to weaken against the greenback resulting in an adverse impact on economy. Now importers will have to pay more in local currency to buy dollar to settle import bills while exporters will get more in term of local currency that may encourage buyers of readymade garments to reduce rates. We must say this is a time for careful market monitoring and adjustment keeping eyes on protracting greater national interest.
The government must ensure remittance inflow through banking channels as higher dollar price may be a boon for expatriates and their families. What is more important is that the central bank must rein in the situation to arrest bigger volatility in currency market. Available data showed that the central bank was in dollar buying spree since July 2012 to January 2017 to help prevent the sliding value of the greenback against the local currency. But the situation now reversed and it goes to sell dollar to control the prevailing dollar crisis. On Thursday, the inter-bank exchange rate of the US dollar stood at Tk 83.19, up from Tk 80.60 on July 2. Economists said that dollar shortage has kept the exchange rate high but selling of dollar cannot be the solution. It needs a combined exchange rate adjustment in the short run and a structural reform in the medium to long run.
The current account deficit has been widened during the first four months of the current fiscal year due to weak export earnings and rising import payments. Between July and October, imports increased by 28.70 per cent year-on-year basis and exports by 7.63 per cent widening the current account deficit. Widening current-account deficit led to a much weaker currency. In our view the government should take initiatives to increase export earnings in order to cope with the large current account deficit and plug the loopholes for bigger capital flights.
