Dollar getting costlier on rising imports, travels abroad
More for less: Taka’s value continues to fall
The falling value of taka is beginning to take a toll on the common people. Worst hit are students and patients going abroad for education or treatment. The upcoming holy month of Ramadan, along with the Russia-Ukraine conflict, have also made the grounds ripe for further deterioration in the country's exchange rate.
On Wednesday, the dollar was sold at Tk86.20 in the interbank market. The Saudi riyal was being sold at Tk22.98. Meanwhile, the banks were trading the dollars at Tk 88-89.
In the open market, however, the prices were much higher.
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Shah Alam, who came from Laxmipur to buy Saudi Riyal in the open market on Wednesday, said he bought 1500 riyals at Tk24.50 each.
Ripon, a currency seller, said he was charging Tk92.50 per dollar and Tk24.20 per riyal. According to him, the Russia-Ukraine war had led to a fall in the supply of dollars, while demand remained high. Besides, he said that many people were going to Saudi Arabia to perform Umrah during the month of Ramadan, so the price of riyal was also increasing.
The central bank had last increased the price of dollars to Tk86 in the beginning of January, before the latest adjustment on March 23.
Experts have pointed out a number of other reasons for the situation, including higher demand for the dollar and falling remittances.
Sirajul Islam, executive director and spokesperson of the central bank, said that the central bank was selling dollars according to the demands of the banks.
He, however, said that the price was a bit higher in the open market than in normal banking channels. "Because the remittances that come to the banking channel are not going out anymore, the price in the open market would go up as there is less dollar flow there. Even then, the central bank has a vision to control the market," he said.
The central bank has sold about $3.78 billion so far this fiscal year. However, its reserves stood at $44.19 billion, down from $48 billion in August last year.
Meanwhile, remittances sent by expatriates have been declining since the beginning of the current financial year. In the eight months from July to February, the expatriate income decreased by 19.46 percent.
At the same time, the demand for dollars from the country's banks has increased due to higher import costs. The country's reserves have already decreased by about $4billion.
In the first seven months of the current fiscal year 2021-22, in July-January, the rate of opening letter of credit (LC) increased by 49%. Export income, however, rose by about 31%.
Industry insiders say exporters and expatriates will benefit if the dollar appreciates, while importers and consumers will be counting losses.
Bangladesh's current-account deficit exceeded the $10-billion mark during the period under review following the higher import payments alongside lower inflow of remittances.
The current-account deficit rose to $10.06 billion during the July-January period of FY'22 from $8.18 billion a month ago. It was a $1.56 billion surplus in the same period of FY'21.
The trade gap with the rest of the world increased over 82% or $8.43 billion to $18.69 billion during the July-January period of FY 2021-22, from $10.27 billion in the same period of FY'21, according to the central bank's latest statistics.
But this may not all be doom and gloom. Some economists and bankers say the value of money needs to be further reduced to increase foreign income at this time. This will increase remittances i.e. expatriate income and export of goods and services.
Ahsan H Mansur, executive director of the Policy Research Institute (PRI), said the country's import deficit has widened. In order to reduce the import-export deficit, the value of the dollar against taka will have to be increased further. This will increase the income flow of expatriates. Export prices will also be higher.
He further said that the expatriates are bringing money in hand instead of through their accounts as the rates were higher in the open market. He recommended that the difference between the two markets be brought down to one taka.
Salehuddin Ahmed, a former central bank governor, said imports had risen sharply since Covid-19. At the same time, travelling abroad for medical treatment and education has increased a lot, which has led to an increase in the cost of the dollar.
"The total income of expatriates has also decreased. They are sending less money for that. Again, many are sending dollars by hand. Because, if you send it like this, you can get more money."
