prothom hello ,
We see that the value of the dollar is increasing. Now the government has used the crawling peg system to devalue the taka. Many people say that this should have been done earlier. What do you say? Can this creeping peg measure make any difference now?
Zahid Hussain
There are questions about whether it is actually a creeping peg that has been implemented here. If the system employed is indeed a crawling peg, there must be room for fluctuations. Here we see that Bangladesh Bank has fixed a rate for the dollar, i.e. 117 taka. Bangladesh Bank's circular does not mention how much above or below this it will rise or fall. According to the media, it may fluctuate by one taka. Then there is the matter of buying and selling rate of dollar. It is not clear. We see a “peg” placed at 117 taka, but we do not see a “creep”.
The question is, if we cannot pay more than 118 taka to the dollar, will the inflow of dollars through formal channels reduce? The market itself does not believe that this rate will last. The currency market has become unstable. Since there is no possibility of the dollar rate falling, exporters who receive bills in dollars may delay bringing in their dollars in the hope that the dollar price will rise further.
The creeping peg system is implemented in Nicaragua and Vietnam. The situation in Nicaragua is different. And in Vietnam, the central bank sets the rate every day based on the previous day's market. Buying and selling can be done up or down with a fluctuation of 5 percent. Interestingly, what is being done in Bangladesh in the name of crawling peg has been recognized by the IMF. I think they know something we don't. Perhaps they have been told the maximum limit on the buying and selling rate of the dollar.
prothom hello ,
What do you think about the complete opening of interest rates?
I think it is better late than never. There is no need to worry about where the interest rate will go or whether it will go up too much. It will be determined by the bank-customer relationship and this is nothing new. Problems arise when interest rates are fixed without any consideration of risks. Now there will be scope for revision of that. Interest rates can be higher for loans where there are risks. And where the risks are low, banks can lend at lower interest rates.
Many may feel that financial institutions are holding borrowers hostage by keeping interest rates open. I think that won't happen. Our regulatory authorities should keep their eyes open in this regard and remain alert. Any kind of irregularity cannot be forgiven.
prothom hello ,
The decline in reserves also cannot be stopped. Is there something to be done here?
Zahid Hussain
Currency exchange rates should also be market based. If it is left to the market, BAB and BAFEDA can together decide at what price banks will buy and sell dollars every day. If it is declared with complete transparency at what price the dollar will be bought and sold, then there will be competition between buyers and sellers. Sellers will sell to those offering the highest rate, buyers will go to those offering the lowest rate. I think if this can be done then it will have an impact on the dollar reserves. Buyers and sellers will move to the formal market.