All economic areas are at high risk

Zarif Mahmud: The value of the taka against the dollar suddenly fell further. The price of dollar increased by Tk 7 in one day. In this, the value of the taka against the dollar has decreased by 6.36 percent. Never before has the price of the dollar in the country increased so much together.
Therefore, the increase in the price of the dollar is going to affect almost all sectors of the economy. Pressure will be created on foreign debt repayments, electricity and fuel prices. The burden of capacity charges will also increase. LC adjustment costs will also increase. It will increase the price of all imported products. As a result, inflation will rise again.

The new rate of the dollar was determined last Wednesday in a hurry to comply with the conditions of obtaining a loan of $470 million from the International Monetary Fund (IMF). The central bank announced the ‘crawling peg’ approach at a time when a delegation of donor agencies was about to wrap up its visit to Bangladesh. A 10-member IMF delegation came to Bangladesh on April 24 to review the waiver of the third tranche of pledged loans. The delegation’s long visit ended on Wednesday, May 8.
Meanwhile, economists and businessmen believe that import and production costs will increase due to the large devaluation of the taka against the dollar. They said that the price of all imported goods will increase due to the increase in the dollar rate, including the increase in customs duties. This may further fuel inflation. Besides, due to the increase of Tk 7, the costing of imports will increase a lot, and there will be big losses in imports. Besides, the pressure of foreign debt repayment will increase a lot.
According to sources, the dollar will officially rise by a jump to Tk 7 to bear the additional cost of foreign debt repayments. It will increase the expenditure in the government budget. According to the data of Bangladesh Bank, at the end of last December, the foreign debt status stood at $100.64 billion, which in Bangladeshi currency (Tk 110 per dollar) was Tk 11 lakh 7 thousand 40 crore. However, last Wednesday, due to an increase of Tk 7 per dollar, the amount of debt increased by a jump in local currency to Tk 70,448 crore. Because Bangladesh Bank has fixed the dollar exchange rate at Tk 117 from Wednesday. Accordingly, the amount of foreign debt has increased to Tk 11 lakh 77 thousand 488 crore.
Meanwhile, according to the Economic Relations Department (ERD), the government’s debt and interest payments have already increased in the current financial year. As of last March, the principal repayment of the loan was $151.664 billion and the interest payment was $105.451 billion. Its amount in local currency was Tk 16 thousand 679 crore 62 lakh and 11 thousand 601 crore 83 lakh respectively. The total amount of interest and principal paid is $257.155 million or Tk 28,281.45crore.
It can be seen that in the current fiscal year, the average foreign debt (interest and principal) has been paid $2,857 million or Tk 3,142.38crore. Even if the payment is made at the same rate, the foreign debt repayment cost of the government will be Tk 3 thousand 342 crore 35 lakh per month. That is, even if the foreign debt repayment remains at the same rate, the expenditure in this sector will increase by about Tk 200 crore in domestic currency.
Meanwhile, the increase in dollar rate will also affect the settlement of earlier open LCs. Because now the LC has to be settled at an additional rate of Tk 7-8. Importers will be in trouble. Because their spending on imported goods will jump by more than 6 percent. Besides, the rate of opening new LCs has already increased. It is reported that the bank which was doing LC at Tk 115 last Wednesday is taking the rate from Tk 117.50 to Tk 118 on Thursday.
On the other hand, the price of fuel, especially diesel, will increase. Fertilizer import costs will also increase. Because traders buy dollars at an extra rate to import goods, but Bangladesh Bank used to pay Tk 110 to import goods like fertilizer and fuel. Now it will be sold for Tk 117. Besides, the price of LPG will also increase. Because the prices of both diesel and LPG are adjusted every month. Therefore, the dollar exchange rate is an important factor in the formula. And if the price of diesel increases, the transport fare will also increase.
Syed Mahbubur Rahman, Managing Director of Mutual Trust Bank told in this regard that due to the increase in the dollar rate, there will be pressure on the payment of foreign loans. Because the government will have to pay additional Tk 7. Besides, Bangladesh Bank was selling dollars at the price of Tk 110 to import fuel and fertilizers. Due to increase in dollar price, the import cost of these products will increase. Now the government has to increase its capacity and revenue to handle these issues.
On the other hand, the increase in the price of the dollar will have a direct impact on the power sector. Because in this sector especially the capacity charge has to be paid based on the dollar exchange rate. In this case, the dollar exchange rate is taken according to Sonali Bank’s dollar exchange rate. That is, the capacity charge is paid at the rate of Tk 110 per dollar. But now it has to be paid for Tk 117.
Imported fuel oil and coal for power generation are also paid directly in dollars. As a result, the cost of power generation will increase. According to the Ministry of Finance’s Power Development Board (PDB) last year, a one taka increase in the dollar exchange rate increases the expenditure on the power sector by Tk 474 crore. As a result, the cost of electricity production has increased by Tk 3,318 crores with a Tk 7 price increase.
However, PDB officials believe that the cost will increase even more. They say, after showing this calculation last year, new power plants have come into production. The cost of paying capacity charges for these new power plants has also increased. Besides, India’s Adani started importing electricity in April last year. This import cost has to be paid in dollars. This will increase the cost of electricity import from India.
The executive director of the private research institute Policy Research Institute (PRI) Ahsan H Mansoor told that due to increase in dollar rate, the cost of foreign debt repayment and import of fuel oil and fertilizers will increase. But the dollar rate was much more restrained. So, it has to be stabilized. That is why the interest rate has been made market based. If the interest rate hike is successful and the dollar stays at Tk 117, it will be good for the government and the general public.
Meanwhile, a rise in the value of the dollar will increase food, especially imported food and non-food inflation. Because on the one hand increase in fuel oil price will increase the cost of transportation, on the other hand the cost of opening and settlement of LC will increase the price of imported goods. Besides, the government has decided to increase electricity prices four times a year due to IMF conditions. Its overall impact will be on almost all sectors of the economy.
Helal Uddin, the former vice-president of FBCCI, the top business organization and president of Bangladesh Shop Owners Association told, “Our country is dependent on imports.” Our economy has been under pressure for a long time. Now suddenly raising the value of the dollar too much will create a negative effect; Imports in particular will be negatively affected. Import costs of goods will increase a lot; The importers will be forced to increase the price of the product.
He said, the common people will be pressured by the sudden decision to increase the price of the dollar. Inflation will increase, people will suffer. In this case, if the price were gradually increased, the suffering would be a little less. Bangladesh Bank should take decision considering all aspects.