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Fixing taka-dollar exchange rate has failed to prevent devaluation of taka, thus driving up improtprices and cscalating inflation.
The exchange rate of U.S dollar against taka has been fixed like the prices of sugar or edible oil. From now on, U.S. dollar will be aailabe at 76 taka for remittance and export. Following a Bangladesh Bank request, representatives of foreign currency dealing banks at a meeting held on October 10 decided fo fix this dollar-taka exchange rates. However, a spokesman of the banks said, they took the decision to avoid further depreciation of taka against U.S. dollar.
Earlier, on October 5, dputy governor of Central Bank, Ziaul Hasan Siddique, in an emergency meeting with the chief executives of the banks, discussed the increasing value of U.S. dollar against taka and directed them to bring stability in the market.
Following the discussin, Bangladesh Foreign Exchange Dealers Association (BAFEDA) at a meeting fixed the dollar-taka exchange rates. BAFEDA has taken such a decision for the first time since the introduction of Floating Exchange Rate in 2003. However, exchange rate of U,S. dollar against taka did not stop rising after the move.
Fixing the dollar-taka exchange rates have appeared to be similar to recent commerce ministry decisions regarding fising of the prices of essential commodities in the market. Officials of the ministry invited concerned businessmen in a meeting to discuss price level of essential commodities and fixed selling price for each of the items. But in reality, nobody complied wth those limits and prices kept on soaring without any caps on them.
BAFEDA chairman and managing director of state-ownerd Janata Bank S.M> Aminur Rahman said that the rate remained in force for couple of weeks. He said,m the members of the association were going to meet again for a renewed fixing of dollar-taka exchange rates based on the latest market situation.
According to Bangladesh Bangk statistics, seelling rate of U.S. Dollar wat 75.6 taka and buying rate 75.48 taka on October 12 after fixing of exchange rates. State-owned sonali Bank bought dollars at 74.98 taka and sold at 75.98 taka.
Hight Dollar Cast Drives Inflation
Hight taka-dollar exchange is boosting price inflation, said Mustafa K. Mujeri, director of Bangladesh Institute of Development Studies.
Price inflation will go further up if the situation does not improve, the former chief economist of Bangladesh Bangk alerted, reminding that the rate of dollar against taka has reached an alarming level. Terming the countay’s economy import-based, Mujeri said, cast of import goes up if the price of dollar increases. High import cast drives up the prices of commodities resulting in price inflatin, he added.
With increased flow of remittance taka was strong against U.S. dollar for a couple of weeks before Eid-ul-Fitr. However, value of taka started to depreciate against U.S. currency following the Eid holidays. According to Bangladesh Bank statistics, selling rate of U.S. dollar was 73.61 taka in August while it sold at taka 75.6 in November. Statistics of the central bank showed hat selling rate of U.S. dollaar was 70.45 taka on October 5 last year. With the current exchange rate, the value of taka against dollar has declinced by eight percent in the past one year.
Mostafa Mujeri said that the country’s import bill is soaring with the decreasing value of taka against U.S. dollar. The high import bill is also increasing pessure in foreign currency reserve and budgetary management, he cautioned. The latest data of Bangladesh Bureau of Statistics showed that the rate of average price inflation was 8.8 percent in 2010-11 and 11.29 percent on a point=topoint basis in August this year, highest in past three and a half years.
The govermment has set a target to keep the average rate of price inflation below 7.5 percent in the current fiscal. But Mujeri would like to believe it would be almost impossible to maintain that target due to recent increase of petroleum and CNG prices. The former Bangladesh Bank economist also said, it would be hard to tall where the inflation rate would stabilize should the price of U.S. dollar continue to rise. The rising prices of U.S. dollar will also increase import cost of capital machinery and raw materials for industrial sector, driving up prices of non-food goods.
Responding to a question as to what should be the right appproach to boost the value of taka against U.S. dollar, Mujeri replied that there was no alternative to increase of dollar supply. “It will require enhanced flow of remittance and foreign aid,” he added. Sufficient supply of dollar in the market will help bring down its exchange rate with taka by easing the demand pressure for it. Remittance flow saw a 9.33 [ercent growth in the first three months of the current fiscal. During the first two months of the current fiscal, remittance flow got a boost as expatriates sent additional amount th their kiths and kin at home ahead of Eid-ul-Fitr, but it declined again in September.
According to statistics, the country received remittance amounting to U.S dollar 840 million in September, 1.1 billion in August and 1.03 billion in July, the first three months of current fiscal. Meanwhile, Foreign exchange reserve doropped to U.S. dollar 9.88 billon on October 10.
The exchange rate of U.S dollar against taka has been fixed like the prices of sugar or edible oil. From now on, U.S. dollar will be aailabe at 76 taka for remittance and export. Following a Bangladesh Bank request, representatives of foreign currency dealing banks at a meeting held on October 10 decided fo fix this dollar-taka exchange rates. However, a spokesman of the banks said, they took the decision to avoid further depreciation of taka against U.S. dollar.
Earlier, on October 5, dputy governor of Central Bank, Ziaul Hasan Siddique, in an emergency meeting with the chief executives of the banks, discussed the increasing value of U.S. dollar against taka and directed them to bring stability in the market.
Following the discussin, Bangladesh Foreign Exchange Dealers Association (BAFEDA) at a meeting fixed the dollar-taka exchange rates. BAFEDA has taken such a decision for the first time since the introduction of Floating Exchange Rate in 2003. However, exchange rate of U,S. dollar against taka did not stop rising after the move.
Fixing the dollar-taka exchange rates have appeared to be similar to recent commerce ministry decisions regarding fising of the prices of essential commodities in the market. Officials of the ministry invited concerned businessmen in a meeting to discuss price level of essential commodities and fixed selling price for each of the items. But in reality, nobody complied wth those limits and prices kept on soaring without any caps on them.
BAFEDA chairman and managing director of state-ownerd Janata Bank S.M> Aminur Rahman said that the rate remained in force for couple of weeks. He said,m the members of the association were going to meet again for a renewed fixing of dollar-taka exchange rates based on the latest market situation.
According to Bangladesh Bangk statistics, seelling rate of U.S. Dollar wat 75.6 taka and buying rate 75.48 taka on October 12 after fixing of exchange rates. State-owned sonali Bank bought dollars at 74.98 taka and sold at 75.98 taka.
Hight Dollar Cast Drives Inflation
Hight taka-dollar exchange is boosting price inflation, said Mustafa K. Mujeri, director of Bangladesh Institute of Development Studies.
Price inflation will go further up if the situation does not improve, the former chief economist of Bangladesh Bangk alerted, reminding that the rate of dollar against taka has reached an alarming level. Terming the countay’s economy import-based, Mujeri said, cast of import goes up if the price of dollar increases. High import cast drives up the prices of commodities resulting in price inflatin, he added.
With increased flow of remittance taka was strong against U.S. dollar for a couple of weeks before Eid-ul-Fitr. However, value of taka started to depreciate against U.S. currency following the Eid holidays. According to Bangladesh Bank statistics, selling rate of U.S. dollar was 73.61 taka in August while it sold at taka 75.6 in November. Statistics of the central bank showed hat selling rate of U.S. dollaar was 70.45 taka on October 5 last year. With the current exchange rate, the value of taka against dollar has declinced by eight percent in the past one year.
Mostafa Mujeri said that the country’s import bill is soaring with the decreasing value of taka against U.S. dollar. The high import bill is also increasing pessure in foreign currency reserve and budgetary management, he cautioned. The latest data of Bangladesh Bureau of Statistics showed that the rate of average price inflation was 8.8 percent in 2010-11 and 11.29 percent on a point=topoint basis in August this year, highest in past three and a half years.
The govermment has set a target to keep the average rate of price inflation below 7.5 percent in the current fiscal. But Mujeri would like to believe it would be almost impossible to maintain that target due to recent increase of petroleum and CNG prices. The former Bangladesh Bank economist also said, it would be hard to tall where the inflation rate would stabilize should the price of U.S. dollar continue to rise. The rising prices of U.S. dollar will also increase import cost of capital machinery and raw materials for industrial sector, driving up prices of non-food goods.
Responding to a question as to what should be the right appproach to boost the value of taka against U.S. dollar, Mujeri replied that there was no alternative to increase of dollar supply. “It will require enhanced flow of remittance and foreign aid,” he added. Sufficient supply of dollar in the market will help bring down its exchange rate with taka by easing the demand pressure for it. Remittance flow saw a 9.33 [ercent growth in the first three months of the current fiscal. During the first two months of the current fiscal, remittance flow got a boost as expatriates sent additional amount th their kiths and kin at home ahead of Eid-ul-Fitr, but it declined again in September.
According to statistics, the country received remittance amounting to U.S dollar 840 million in September, 1.1 billion in August and 1.03 billion in July, the first three months of current fiscal. Meanwhile, Foreign exchange reserve doropped to U.S. dollar 9.88 billon on October 10.
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