Bangladesh ministry says weak taka number one risk for macro stability

11 Jun '23

2 min read

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Bangladesh's finance ministry has identified the losing value of taka, which is fuelling inflation and adding to government expenses, as the top risk for macroeconomic stability for the next three years.
If the taka loses its value against the USD by a taka more, the electricity subsidy spending will go up by Tk473.6 crore in the next fiscal, it projected.

If the taka loses its value against the US dollar by a taka more, the Bangladesh government's subsidy spending for electricity alone will go up by Tk473.6 crore in the next fiscal, according to projections by the finance ministry, which recently identified the losing value of taka as the top risk for the country’s macroeconomic stability for the next three years.

A 10 per cent depreciation will mean a rise of Tk3,800 crore in government loans and guarantees in the fiscal 2023-24, a ministry document, titled ‘Medium-Term Macroeconomic Policy Statement 2023-24 to 2025-26’, said.

The losing value of taka is not only fuelling inflation, but also adding to the government’s financial costs and has resulted in increased expenditure on imports and scheduled foreign debt repayments, it noted.

A further depreciation will escalate the government's debt burden and create financial risks to projects taken up under public-private partnership, said the document.

"The devaluation of the currency can lead to a substantial increase in government project expenditure. Many government initiatives, particularly mega projects, rely heavily on imported goods. Consequently, due to the depreciation of the exchange rate, project costs may escalate, resulting in an additional financial burden," it said.

The document cautions that if the fall in the exchange rate of the taka continues, it will not be possible to achieve the annual gross national income (GNI) plan as per the target of the eighth five-year plan.

Fibre2Fashion News Desk (DS)

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