Dollar buying continues - bdnews24.com
Dollar buying continues
Abdur Rahim Harmachi, Chief Economics Correspondent, bdnews24.com
Published: 22 Sep 2013 11:09 BdST Updated: 24 Sep 2013 09:09 BdST
Bangladesh Bank continues to buy US dollars from the market to stabilize the value of Taka but some feel that could adversely impact the economy.
The critics say Indian goods, buoyed by a falling rupee, may gain a greater share of the Bangladesh market if the Taka remains stable vis-à-vis the dollar.
In the first two and half months of the current 2013-14 fiscal, the Bangladesh Bank has picked up $ 1 billion from the floating market, said Kazi Saidur Rahman, who heads the central banks Forex Division.
This buying has been possible as more dollars are available in the market he said.
In the entire 2012-13 fiscal, $ 4.8 billion had been purchased from the market so clearly the buying has gone up this fiscal.
That has helped the Taka stay stable against the US dollar, at a time when the Indian rupee depreciated sharply against the US currency.
As a result, Bangladesh forex reserves have shot up to $ 16 billion.
Former Bangladesh Bank governor Mohammed Farashuddin is not sure whether buying huge amount of US dollars is the right thing to do under current circumstances.
The dollar has gained against the Indian rupee but Delhi may be using this to drive up the countrys exports in competitive markets. This may help Indian goods capture the Bangladesh market all the more, Farasuddin told bdnews24.com.
He said Indian goods have become cheaper in our market after the rupee has fallen against the dollar but with the Taka stable, our goods are more expensive now.
As it is , we import a lot from India and the trade balance is always adverse. But this is set to increase both in legal and informal trade.
In India, the rupee has lately improved against the dollar. After falling to below 68 rupees for a dollar a week ago against 51 four months back, the rupee has now clawed back to 61.74 to a dollar on Thursday.
This has happened on the back of some other measures announced by Reserve Bank of Indias (RBI) new governor Raghuram Rajan. But the RBI has refrained from frantic dollar buying.
Bangladesh introduced the floating exchange rate in 2003 , leaving foreign exchange value to be determined by market forces.
But Bangladesh Bank has often intervened to stabilize the national currency and buying off US dollars has been favoured.
This is not a good thing to do. It serves no purpose holding a huge forex reserve built on dollar buying. These funds should be invested gainfully for growth, said Farasuddin.
It is enough to have a forex reserve that can pay for critical food imports so that none starves in the country.
Farasuddin said bumper harvests have provided Bangladesh with 1.5 million tonnes of food grains which means no food imports may be necessary for about 18 months.
So holding on to a huge forex reserves is not a smart option, Farasuddin said.
After paying off the Asian Clearing Union (ACU) in early September, Bangladesh forex reserves had dropped somewhat to $ 15.5 billion, but it has soared past $ 16 billion in the last few days.