As Bangladesh’s central bank depreciated the taka against the US dollar to make the country more competitive globally, exporters and businesses welcomed the decision, saying it will make them more competitive as the government had reduced the cash incentive on export receipts and the cost of doing business had significantly risen due to increasing gas and power tariffs.

Economists and experts, however, recommended discontinuing cash incentives for exports, arguing that the latest big taka devaluation effectively functions as a subsidy.

The taka depreciated by 28 per cent to Tk 110 per dollar between January 2022 and April 2024. Following the latest depreciation through the crawling peg—introduced for the first time in the country’s history—the taka lost 6.36 per cent of its value, falling to Tk 117 per dollar from Tk 110.

Including the latest depreciation, the currency has lost 36 per cent of its value against the greenback since January 2022.

The taka was firm at Tk 85 per dollar for over a decade, but started weakening amid increasing pressure on the foreign exchange reserves.

The Bangladesh Garment Manufacturers and Exporters Association (BGMEA) feels a suffocating situation was created for garment exporters due to higher cost of doing business and the latest decision will offer some relief.

But exporters must negotiate higher prices so they are not deprived of the benefits offered by such a decision, BGMEA said.

The Dhaka Chamber of Commerce and Industry (DCCI) appreciated the decision, terming it a proper step towards a market-based exchange rate, according to domestic media outlets.

The Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) and the Bangladesh Textile Mills Association also welcomed the central bank’s decision as well. However, if the exchange rate for remittances is higher than for exports, there will a problem, BKMEA said.

At a book launch event in Dhaka recently, experts said the devaluation was necessary due to the exchange rate's prolonged overvaluation.

They called for coordinated trade, fiscal and monetary policies for optimal results and argued that standalone monetary policy or any other single policy would be insufficient to stabilise the macroeconomic situation.

Fibre2Fashion News Desk (DS)

Disclaimer - All News/Articles items are subject to copyright and no article either in full or part may be reproduced in any form without permission from Fibre2Fashion Pvt. Ltd.