Taka devalued by Tk1.5 – biggest in FY23

The Bangladesh Bank has increased the rate at which it sells the dollar from the reserves for the 15th time in the current fiscal year by Tk1.5 – the largest single devaluation of the taka.

The new rate has now reached Tk104.5.

According to the central bank, the previous largest single increase in the dollar selling rate was Tk1 and at that amount, the rate was raised eight times.

Meanwhile, the reserves have dropped below $31 billion after the Asian Clearing Union (ACU) bill payment of $1.05 billion in March.

The reserves are expected to decrease further and fall below $30 billion after an upcoming payment of the ACU due this week.

Earlier in April, the dollar selling price from reserves was increased by Tk1. In addition, the rate was raised by Tk1 every month from December 2022 to last March.

The taka has already been devalued by 21% over the last one year, which has led to an increase in the dollar rate from Tk86.45 to Tk104.50, according to data from the Bangladesh Bank. 

The central bank is devaluing the local currency at a faster rate due to two main reasons. Firstly, it aims to reduce the pressure on dollar selling from the reserves, and secondly, it aims to establish a unified exchange rate, a senior executive of the central bank told The Business Standard.

Several officials of the banking sector's policy-making body, who did not wish to be named, told The Business Standard that the selling price of dollars from the reserves may increase a little more in the next few months.

Currently, there are several rates of the dollar in circulation in the market. According to the decision of the Association of Bankers Bangladesh (ABB) and the Bangladesh Foreign Exchange Dealers Association (Bafeda), banks are giving a rate of Tk106 for export proceeds and Tk108 for remittances.

Besides, the rate of the dollar in interbank exchange is Tk107. On Tuesday, banks fixed an average rate of Tk107 in import settlements. Although importers claimed, banks were charging them up to Tk113-114 for each dollar.

Reserves fall below $31b

The central bank's reserves fell below $31 billion due to its continued sales to banks for various import settlements with the government. The Bangladesh Bank sold $57 million at the new rate on Tuesday.

According to central bank spokesperson Md Mezbaul Haque, reserves fell to $30.98 billion at the end of Tuesday.

According to central bank data, reserves, which were over $44 billion at the end of April 2022, have been on the decline for the past year. As a result, the reserves decreased by more than $13 billion in one year.

Of course, a large part of this is due to selling dollars from reserves.

According to the central bank's data, it sold $11.83 billion from the reserves from July of the current fiscal year to yesterday. Earlier, it sold $7.62 billion in the fiscal 2021-22 as well.

However, the Bangladesh Bank in FY21 bought around $8 billion from banks due to low imports and high remittance inflows amid the coronavirus pandemic.

According to the central bank, the dollars are sold from reserves to pay for government purchases and the import of essential commodities.

Although a record amount of dollars has been sold from the reserves, state-owned banks say they are not getting enough dollars.

A treasury department official at a state-owned bank said, "The central bank is not giving us the amount of dollars we are asking for. We are getting $5-10 million when we want $100 million. As a result, we have to depend on conventional markets for the required dollars."