///Take steps to stabilise the exchange rate: Towfiqul Islam Khan

Take steps to stabilise the exchange rate: Towfiqul Islam Khan

2018-01-22T11:39:05+00:00 January 22nd, 2018|CPD in the Media, Towfiqul Islam Khan|

Published in New Age on Monday, 22 January 2018

Rise of foreign currencies bringing economic worries

Staff Correspondent

Depreciation of the taka against all major international currencies including the US dollar has continued over the last few months reaching its highest peak at Tk 82.88 per dollar on Thursday causing apprehension of economic pressure particularly on inflation and balance of payment.

The situation may be prolonged making import of essentials costlier until export earnings and remittance inflows pick up at expected level, experts on Sunday said.

They said that further depreciation of the taka would increase inflationary pressure as price of imported food and non-food items would go up while exporter and remittance earners will be benefitted.

Exporters, however, expressed their happiness over the appreciation of international currencies particularly US dollar and sought further devaluation of Taka to boost export earnings and enhance competitiveness.

According to Bangladesh Bank data, the interbank exchange rate stood at Tk 82.88 per dollar, up from Tk 88.80 a week earlier and Tk 78.95 a year ago.

The exchange rate of the British currency pound sterling reached Tk 114.8220 on Thursday from Tk 113.7010 a week ago and Tk 96.8006 a year back.

The rate was Tk 101.3042 per EURO on the day, which was Tk 100.9249 on January 14 this year and Tk 83.9317 on the same day of last year.

Costly import will also raise the cost of implementation of development projects that depend on import. The government is now implementing many such mega projects including power plants, nuclear power plants and LNG terminal.

Policy Research Institute executive director Ahsan H Mansur told New Age that depreciation of Taka would continue for some more days until growth in export earnings and remittance inflows pick up.

‘The major concern is the high price of commodities including crude oil in global market which will create pressure on cost of living as import of goods particularly non-food items is very high in the country,’ he said.

He, however, said that the overall food inflation might be compensated following expected drop in price of rice by April.

Former adviser to an interim government and economist AB Mirza Azizul Islam said that there was fear that inflation would go up following continuous depreciation of Taka as import would become costlier resulting in an increase in the cost of production and price of goods at retail market.

On the other hand, exporters would be benefited from devaluation of local currency, he said.

The government might address the dilemma by containing further depreciation of Taka and giving need-based subsidy to exporters, he added.

Centre for Policy Dialogue research fellow Towfiqul Islam Khan said that it was time to take steps to stabilise the exchange rate as continuous depreciation of Taka would make import costlier which is bad for inflation, implementation of the import-dependent development projects and overall investment decision.

Excessive devaluation of currency would cause cost escalation of development projects while investors would wait to finalise their investment decision following uncertainty over price of imported raw materials, he said.

The government could contain the situation by discouraging imports, except those related to production and food safety, he added.

The rate of depreciation that took place in last one year helped exporters to restore their competitiveness, he added.

Bangladesh Garment Manufacturers and Exporters Association president Siddiqur Rahman, however, opposed the view of restraining depreciation process.

He said that the government should let the depreciation process continue to save export sector and boost competitiveness in global market.

Exchange rate of Taka against US dollar peaked at Tk 84 few years ago. The rate should reach at that level, he said, adding that market should determine the exchange rate in its own way.

Exporters Association of Bangladesh president Abdus Salam Murshedy said that though exporters got some benefits from the depreciation, the level of depreciation was not enough to compete with global competitors.

Bangladesh’s competitors in export market devalued their currencies in last few months to increase their competitiveness, he said, adding that India devalued its currency by 35 per cent, Turkey by 102 per cent and Pakistan by 15 per cent.

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