Taka gains on falling imports, rising remittances | The Daily Star
12:00 AM, June 25, 2020 / LAST MODIFIED: 02:27 AM, June 25, 2020

Taka gains on falling imports, rising remittances

Forex reserves cross $35b

The local currency has started appreciating suddenly due to a massive fall in import payments and rise in remittances in recent weeks.

This helped the country's foreign exchange reserve surpass the $35-billion mark for the first time yesterday, according to data from the central bank.

Typically, an increase in the value of one currency makes imports cheaper and exports costlier.

Bankers and an economist said the central bank will have to step in to stop the appreciating trend of the taka at any cost in the interest of the country's export sector, or else it will impact badly the financial sector as a whole in the days to come.

Yesterday, the interbank exchange rate stood at Tk 84.80 per dollar, down from Tk 84.95 on June 18. The exchange rate of the taka had been maintaining a stable position since November last year until the latest uptick.

Multilateral lender agencies have recently released nearly $1.5 billion in soft loans to help Bangladesh fight against the ongoing economic meltdown brought on by the coronavirus pandemic along with meeting their previous commitments for various projects.

In addition, the expatriate Bangladeshis sent remittance amounting to $1.41 billion in the first 23 days of June, which is higher than the same period a year ago when the inflow stood at $1.36 billion.

Against the backdrop, the reserve rose to a record high of $34 billion on June 3 and made another record yesterday.

"There is no scope to feel complacency about the rising trend of remittance as thousands of expatriates have been forced to return home and many others are set to be deported," said Ahsan H Mansur, executive director of the Policy Research Institute of Bangladesh.  The workers are sending their liquid assets to the country before leaving their host countries, he said.

Exporters are struggling to survive from the current economic fallout and the appreciating trend of the local currency has dealt a blow to them, said Mansur, also a former high official of the International Monetary Fund.

"The central bank should purchase dollars heavily from banks in order to curb the appreciating trend."

The Bangladesh Bank purchased $115 million from banks on June 23 as part of its effort to tackle the appreciation of the currency.

"We have long been requesting the central bank to depreciate the taka, but it has not done so. The ongoing crisis could have been tackled smoothly had the BB devalued the taka in time," Mansur said.

Both the central bank and the government should protect the interest of exporters by depreciating the taka, he said.

Syed Mahbubur Rahman, managing director of Mutual Trust Bank, echoed Mansur, saying banks now enjoy a robust amount of foreign currencies because of the fall in imports.

"The depreciating trend of the dollar should be stopped to protect both remitters and exporters," he said.

Between July and April, export earnings stood at $28.75 billion, down 13.20 per cent from a year earlier. Import payments fell 8.77 per cent to $42.97 billion.

"The balance of payments is now in dire straits due to the economic fallout. We would have felt happiness had exports, imports and remittances registered a good trend in tandem," Mansur said.

Bangladesh is not the only country that is witnessing a higher foreign currency reserve: almost all emerging economies are seeing the same trend.

For instance, India's reserves crossed the $500-billion mark for the first time on June 5 as there has been no sufficient demand for foreign currencies from oil marketing companies.

The central bank of India secured an additional foreign exchange reserve of $31.8 billion in the two-and-a-half months to June 5.

"The reserves would put a positive impact on the economy if the authorities can manage the ongoing financial storm properly," said Mansur. 

 

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