Taka devalued against dollar by Tk1.5 again

The Bangladesh Bank on Thursday raised the selling rate of the US dollar from its reserve by Tk1.5 to Tk106.

According to the central bank, this is the second time the taka has been devalued by Tk1.5, highest in the current financial year.

Previously, on the last day of April, the local currency was devalued by Tk1.5.

Earlier, the dollar selling rate from the reserve used to be raised by a maximum of Tk1.

At the new dollar price, $45 million was sold from the reserve on Thursday.

In total, the central bank has sold a record $12.73 billion so far this fiscal year.

Earlier, it sold $7.62 billion in the fiscal year 2021-22. However, the Bangladesh Bank in FY21 bought around $8 billion from banks due to low imports and high remittance inflows amid the pandemic.

According to the Bangladesh Bank, the gross forex reserves of the country stood at $29.87 billion at the end of the day Thursday. It was more than $30 billion even a few days ago.

In the current financial year, the Bangladesh Bank has raised the price of the dollar 16 times. Among these instances, it has been increased by Tk1 on eight occasions. Starting from December 2022 until mid-April of the following year, the dollar experienced a monthly rise of Tk1.

On 1 June last year, the central bank sold the dollar at a rate of Tk89. Within a year, the price of dollars has jumped to Tk106.

This means, the central bank has devalued the taka by more than 19% in one year.

A senior executive of the central bank told The Business Standard, "The Bangladesh 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."

Currently, multiple rates for the dollar are prevalent in the market. In line with the decision of the Association of Bankers Bangladesh (ABB) and Bangladesh Foreign Exchange Dealers Association (Bafeda), banks are giving a rate of Tk107 for export proceeds and Tk108.50 for remittance transactions. Furthermore, the interbank exchange rate for the dollar stands at Tk108.

According to the Bafeda, banks sold the dollar at the highest rate of Tk108.90 on Thursday for import settlement. However, importers have alleged that banks are selling dollars to them at higher rates than the declared rate.

Meanwhile, state-owned banks have reported insufficient availability of dollars to meet their needs despite a significant quantity of dollars being sold from the reserve.

Several central bank officials, who did not want to be named, told TBS that the selling price of the dollar from the reserve may increase a little more next month.

They also said due to the conditions of the International Monetary Fund (IMF), Bangladesh will have to have net reserves of more than $24 billion at the end of June.

Therefore, the central bank has reduced the sale of dollars so that the reserve does not decrease too much. Also, commercial banks have been asked to manage dollars from the market, as per the officials.

An official from the treasury department of a state-owned bank informed TBS, "We regularly need to make import payments for various government purchases, such as fuel oil and fertilisers. We are attempting to ensure smooth transactions by purchasing dollars from the market."

"However, we are facing challenges in acquiring an adequate amount of dollars. One of the contributing factors to this issue is the decrease in remittance inflow and a decline in export proceeds," he added.