Fall of taka hits consumers hard
Consumers had tough times throughout the outgoing year as the local currency depreciated by more than 15 percent against the US dollar in 2011.
Bangladesh Bank (BB) data shows the taka had depreciated only by 0.54 percent in 2008, 0.47 percent in 2009 and 2.09 percent in 2010.
Analysts said this devaluation of the taka acted as a catalyst to a hike in prices of fuel, food, capital machinery and industrial raw materials.
“Import costs went up for the depreciation that had a direct impact on the consumers,” said Dr Mustafa K Mujeri, director general of Bangladesh Institute of Development Studies (BIDS).
BB data also shows the inter-bank exchange rate (also known as wholesale rate) was Tk 71 against a dollar on January 10 this year, which reached Tk 71.60 on March 10, Tk 73.88 on June 09, Tk 74.20 on September 11 and Tk 81.90 on December 29 (yesterday).
The price of the dollar at the customer level (import payments) was on average Tk 82.17 yesterday, according to treasury officials in different banks.
“It's (depreciation) not good for the financial sector. It also impacts the whole economy,” said Dr Salehuddin Ahmed, a former central bank governor.
Ahmed said the depreciation did not only fuel inflation, it also increased the prices of intermediate goods and raw materials and input costs of manufactured goods.
If a businessman imports $10,000 worth of things, he had to spend Tk 700,000 in January 2011. It is now Tk 820,000, up by over 17 percent.
An importer, no matter what he imports, has to bear this additional cost for the exchange rate.
“This additional cost is passed on the consumers,” said Ahmed.
Point-to-point inflation reached nearly 12 percent in November.
A sliding foreign exchange reserve, now at around $9.7 billion, has further worsened the situation, while the central bank cannot pump up enough dollars into the market to stabilise the exchange rate.
“Business costs may go up if foreign banks ask for a third party guarantee, seeing the declining reserve,” said the former BB governor.
Ahmed said the central bank is in a dilemma over the falling exchange rate. Neither can it inject dollar into the market to stabilise the exchange rate in the wake of a falling reserve and balance of payments, nor can it bear the soaring inflationary pressure.
But exporters and remitters had good times as they got more taka due to the depreciation.
“Exports were more competitive in the outgoing year due to the devaluation of the taka,” said Mujeri of the BIDS.
“Bangladeshi expatriates in the Middle East sent home more money in the recent months to cash in on the soaring exchange rate,” said a treasury official of a private bank.
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