Local exporters on edge
Bangladesh has been losing its competitiveness in global trade as many of its competing countries' currencies have depreciated more than the taka.
In the last one year, the local currency has lost 3.71 percent of its value against the US dollar, while the currencies of some other competing countries depreciated more than 10 percent.
For instance, in the last one year, the Indian rupee depreciated 13.58 percent against the greenback, followed by the Indonesian rupiah at 12.79 percent, the Sri Lankan rupee at 11.39 percent and the Chinese yuan at 5.35 percent.
The currency of Vietnam, Bangladesh's closest competitor in global apparel trade, lost 1 percent in value during the period.
“Most of the competing countries have bagged a good outcome by depreciating their respective currencies,” said Ahsan H Mansur, executive director of the Policy Research Institute of Bangladesh.
But the Bangladesh Bank is either injecting dollar into the market or verbally instructing banks not to depreciate the taka, he said. So far this year the central bank has injected $200 million in the market. Last year, it injected $2.31 billion, according to data from the BB.
At present, the interbank exchange rate is Tk 83.80 per USD, up 3.71 percent year-on-year.
“The central bank should allow the open market to set the rate of the dollar against the local currency,” Mansur said.
He said although inflation may spiral in the short-run, in the long-run it will be good for the economy.
The high rate of the USD will force the businesspeople not to import avoidable and luxurious products, said Mansur, also a former economist of the International Monetary Fund.
Local exporters face difficulties because of the depreciating trend of competitors' currencies, said Mustafizur Rahman, a distinguished fellow of the Centre for Policy Dialogue.
“Bangladeshi products are slowly fading away from the focus of foreign buyers thanks to their higher cost,” he said, adding that India is gaining traction in the global market for jute goods, leather and garments because of the heavy depreciation of its rupee.
Last fiscal year, exports fetched $36.66 billion, up 5.81 percent from a year earlier. The amount though fell short of the government's target of $37.5 billion.
The taka depreciated the least in comparison to its peers, said Md Siddiqur Rahman, president of the Bangladesh Garment Manufacturers and Exporters Association.
“India is our main competitor. But, we are lagging behind our other rivals too.”
Rahman went on to call for adjustments to the exchange rate to give a leg up to Bangladeshi exporters.
Meanwhile, a BB official said the Federal Reserve System, the central bank of the US, has already raised its benchmark interest rate thrice this year, meaning that other countries have to spend more to hold the dollar, the global reserve currency.
The ongoing trade war between the US and some other countries is another reason for escalating the exchange rate of the dollar against the currencies of the emerging economies, he said.
“The local currency will face more trouble in the months to come. So, the central bank has to take preparation to tackle the upcoming situation,” he added.
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