The US dollar has become more expensive as Bangladesh Bank on Tuesday increased the regulatory exchange rate by Tk 1.50 to Tk 104.50.
Economists say that more expensive currency exchange may result in more costly imports and consumer products, which could further increase inflation, reported the Financial Express.
Concerned authorities said that the increase in the policy rate was part of a strategy to increase the value of the US dollar even more, to cross Tk 105 per unit by June, in line with the International Monetary Fund’s (IMF) recommendation for achieving a uniform exchange rate of the dollar on the market.
A few days after the Bangladesh Foreign Exchange Dealers’ Association (BAFEDA) and the Association of Bankers Bangladesh (ABB) increased the exchange rate on export proceeds and remittance by Tk 1.0 to Tk 106 and Tk 108, respectively, the most recent increase in the exchange rate of the dollar, sold from the nation’s foreign exchange reserves, took place.
A BB official confirmed the event, stating that the central bank increased the exchange rate by Tk 1.50 to reach Tk 104.50 to reduce the discrepancy between the multiple current values.
According to him, the most recent change was a step in the BB’s effort to ensure a uniform dollar rate on the currency market.
The central bank stated that the difference between the regulated rates would be at most two percentage points even in the twice-a-year Monetary Policy Statement (MPS), which was released last month.
The BB increased the dollar-taka exchange rates multiple times during the previous months as part of the parity approach. On September 12 of last year, the rate was Tk 96.
The BB is currently offering the dollar to the banks for Tk 104.50 per unit, with plans to further increase this price to Tk 105 by June of next year due to the rates’ steady climb.
Another BB official, who requested anonymity, told FE they would increase the fee to Tk 106 in the upcoming month.
“There is a need to reach the goal anyhow by coming June so that the MPS target of keeping the difference in rates two-percentage points is achieved,” indicating the MPS, the official was quoted as saying in the report.
The money market offers a variety of exchange rates in addition to the BB-charged rate. For exporters and remitters, they are Tk 106 and 108.
Pursuant to the BB, the rate for import is computed using a calculated average of the rates for export and remittance that make up Tk 1.0 each.
The central bank said that allowing the market to determine the exchange rate, or “free float,” of the currencies was one of the recommendations made by the International Monetary Fund.
“If we can reach the targeted rate by June, we’ll be very close to the unified market rate,” the source said.
Dr. Masrur Reaz, the chairman of Policy Exchange Bangladesh, believes the increase will cause production costs to rise more quickly, increasing inflation.
He predicts that the impact of the exchange-rate rise will be mitigated over a more extended period by ensuring exchange rate stability.