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Further depreciation of taka intensifies economic gloom

The depreciation of taka against dollar has marked a fresh rise over the past one week, emitting negative signals about the future of the economy including further rise in inflation and increased pressure on the balance of payments.

According to the Bangladesh Bank, the buying rate of a dollar stood at Tk 75.11 and selling rate at Tk 75.14 on Monday, rising from the buying rate of Tk 74.90 and selling rate of Tk 75.05 on September 18.

On the kerb (informal) market, the buying rate of dollar was Tk 76.50 and the selling rate Tk 78.50 one week back but the rates shot up to TK 80 and Tk 81 respectively on Monday.

The BB data shows the buying rate of dollar ranged between Tk 71 and Tk 72 in January 2011.

The exchange rates of dollar on the kerb market are Tk 5 to Tk 6 higher than the central bank’s official rates.

Experts said the import costs had risen significantly due to the depreciation of taka against dollar and other international currencies.

‘Inflation and foreign exchange reserve are also under pressure due to the continued depreciation of taka against dollar,’ they said.

According to the Bangladesh Bureau of Statistics, the average inflation, which in the last fiscal year was 8.78 per cent on a point-to-point basis, reached 10.96 per cent in August last.

According to the central bank data, the country’s total import cost in FY2010-11 amounted to Tk 33,657.50 million, marking a sharp rise from that of Tk 23,738.40 million in FY2009-10.

The growth rate of remittance inflow also slipped from 13.4 per cent in FY2010 to six per cent in FY2011.

A senior official at the National Credit and Commerce Bank said on Monday his bank bought dollar at the rate of Tk 74.80 and sold at Tk 75.90.

A man named Sazzad Hossain bought $200 from a moneychanger of Gulshan in the capital on Monday at the rate of Tk 79.50.

Centre for Policy Dialogue executive director Mustafizur Rahman said as taka losing its value was a bad sign for the economy.

He said the country’s BOP and trade deficits had been on the rise due to the depreciation of taka.

He suggested that ‘the government should take steps to stabilise the foreign exchange market to reduce the adverse impacts of the depreciation of taka’.

‘Inflation is also increasing due to the widening dollar-taka gap and the government should carefully monitor this development,’ he added.

Bangladesh Institute of Development Studies senior research director Zaid Bakht said, ‘As a net importer country, every time we import some thing, we have to pay in dollars, which means when the value of dollar against taka increases, we have to make extra payments for the same thing.’

Zaid said the supply of dollars would have increased, if the amount of remittance inflow and foreign aid had risen.

He said the foreign assistance the country had received in July-August of the current fiscal year was not adequate to keep the balance of payments stable.

‘The flow of foreign aid is not that good and much of the assistance remains stuck in the pipeline,’ he observed.

Bangladesh received $1.05 billion in foreign assistance from its development partners in FY2011 and $1.48 billion in FY2010.

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