Monday, 8 August, 2022
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Dollar crisis deepening

Dollar crisis deepening

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Even after some preventive measures taken by the government, the local currency taka has continued its free fall against the greenback on the back of acute US dollar crisis in the country.  

Dollar price once again crossed Tk 100 mark in the curb market on Sunday to sell at Tk 100.30 at noon, two months after it went up to as high as Tk 104.

Besides, the interbank exchange rate surged Tk 9.15 in a year and it stood at Tk 93.95. The rate is very close to Tk 100 in imports, exports and remittances.

“We’re facing a huge dollar crisis and I could not buy any dollar today. I’ve sold today the dollars which I’ve bought earlier,” a dollar trader said on Sunday requesting anonymity. 

The sharp rise in dollar price has shot up import costs and at the same time industrial production costs. As a result, inflation is going up as well. Economists suggest controlling imports strictly.

After going above Tk 100 on May 17, the exchange rate maintained the level for two-three days and hovered between Tk 97 to Tk 99 for the last two months.

The central bank data showed that the taka lost 10.80 percent value against US dollar in a year. It lost more than 5 percent value in last one and a half months.

The dollar price was Tk 84.80 on July 13 last year and on May 30 this year it rose to Tk 89.

An abrupt rise in imports coupled with a fall in remittance inflow has created the crisis, according to banking sector insiders.

The central bank is trying to fend off the free fall in taka’s value by releasing money from the reserve, but it seems not be enough to prevent the fall. 

The dollar price spiral started in August last year, but the exchange rate was nearly stagnant at Tk 84.80 during the previous one year.

Imports rose sharply after the economy returned to normalcy from the corona pandemic, creating a huge demand for US dollar.

Meanwhile, the government and the central bank have taken several measures to bridle the imports but to no avail.  Even, the continuous dollar selling from the reserve proves futile.

In the first 13 days of 2022-23 fiscal year starting from July 01, the central bank sold a total of $574 million from its forex reserve to stabilise the dollar market.

On the first working day after the Eid vacation, Bangladesh Bank sold $134 million at Tk 93.45 rate. In a few days before Eid, the dollar sale from the reserves was $343 million. 

Meanwhile, the reserve level slipped below $40 billion in two years on July 12 and stood at $39.79 billion on Sunday.

In the just concluded fiscal year 2022, the central bank sold out $7.62 billion from reserve and withdrew Tk 700 billion from the money market to fight the crisis and contain soaring inflation.

But in the previous fiscal, the regulator bought a record $8 billion dollar from the market to maintain the dollar rate to give facility to the exporters. 

Even in the first month of last fiscal year, Bangladesh Bank bought $500 million.

The picture started becoming gloomy from August with high imports coupled with rising exports. The dollar sale from reserve also started from the same month.

The reserve surged to a record $48 billion on August 24 last fiscal, which was enough for meeting import cost of 10 months.

But the current reserve is enough for meeting cost of increased imports for six months, much higher than international standard for three months. 

Inward remittances declined by 15.12 percent to $21.03 billion in 2021-22 fiscal year.

Imports, on the other hand, skyrocketed to $75.40 billion in the first 11 months, which was 39 percent higher than that of the previous fiscal year, according to Export Promotion Bureau (EPB) data.

Exports also rose to a record $52.08 billion, but the year-on-year growth rate was slower at 34.38 percent.

“We’re in a pressure now, but there is nothing to be worried about it. But if we fail to resolve the dollar crisis with stringent measures, we’ll fall into a deep trouble,” said noted economist Dr Ahsan H Mansur.

Economic analysts think that the central bank alone can’t improve the situation. Law enforcers and other concerned agencies should come forward to check out any foul play or infringement of government and central bank directives.