IMF adviser to start work next month

An International Monetary Fund (IMF) adviser will get down to work from next month to devise ways of floating the exchange rate.

The government wants to open up the exchange rate regime by next month to make it market-pegged.

The IMF adviser, David Mitchen, who also performed similar tasks in India, Pakistan and Sri Lanka when they let the market dictate currency rates, will advise the Bangladesh Bank (BB).

BB sources said the exchange rate will be freely floating only in current account and not in capital account, which itself is now non-convertible.

There is an apprehension that foreign currencies might become costlier once the exchange rate is made freely floating, fuelling inflation.

But BB officials and many private bankers allayed the fear, saying banks are already transacting dollar among themselves at rates beyond the BB set band and this did not crate any volatility in the market.

Managing Director of Pubali Bank Khondokar Ibrahim Khaled said when India, Pakistan and Sri Lanka introduced free exchange rate, the market was volatile for some time. But this is unlikely in case of Bangladesh as the official and kerb market dollar rates are now very close.

He said a forex reserves position of $2.5 billion would create a comfortable cushion to go for the free float. Yesterday, the reserves stood at $1.886 billion.

The BB has taken preparations to monitor the currency market once the exchange rate is made free so that no-one can manipulate the market.