Home Bangladesh BD taka devaluing inflation increasing
Bangladesh - August 20, 2023

BD taka devaluing inflation increasing

Staff Correspondent: The prices of all products including imports in the country are increasing day by day. The value of money is decreasing. Inflation rate is increasing. Low- and middle-income people are facing major financial crisis in the existing situation. Expenditure cannot be met with foreign exchange earnings. The cost is more. Especially in the case of earlier deferred foreign debt and interest payments, dollars are now being paid from reserves. The reserve is decreasing.
On the other hand, a portion of remittance and export earnings used to be added to the reserve earlier. At present, the banks do not have any extra dollars to settle their foreign currency liabilities. As a result, dollars are not added to the reserves. Due to this situation for a long time, the pressure on reserves is gradually increasing. The price of the dollar is increasing.
According to sources, under normal conditions, the import expenditure could not be met with the export income. As a result, there was a deficit in foreign trade. Now the deficit has increased. Currently, the average monthly income from remittances and exports in the country is $656 million. In contrast, an average of $5.5 billion is spent on imports per month. There is an additional $106 million. Of this, foreign debt and interest payments are $157 million. As a result, there is an average deficit of $51 million per month.
Apart from this, more money has to be paid for foreign travel, medical expenses, student education expenses, profits earned by foreign companies and royalties. The deficit is increasing. In total, the current account deficit of foreign currency in the last financial year was $333.40 million. In the previous fiscal year 2021-22, there was a deficit of $1,864 million. The deficit has been reduced by $1,530 billion in a span of one year. Deficit has narrowed in the space of a year, but due to deferred foreign debt and interest payments, there is more pressure on the reserves.
According to the report of the central bank, the central bank has sold $1,358 million from the reserve in the last financial year to pay the import expenses and foreign debt. In July, it sold $1.14 billion. Dollar selling continues in August. At that time, it only increased reserves by buying some dollars in July to pay the debt of the Asian Clearing Union.
Earlier the central bank used to increase the reserves by buying dollars from the market. Because at that time the income was more than the foreign exchange expenditure. As a result, the banks were forced to sell the extra dollars. Because they could not keep more than the fixed quota of dollars. 60 percent of the import expenditure can be met with the total export income of the country. The remaining 40 percent is met from remittances. Even then 20 percent was added to the remittance reserve.
Since last year, import expenditure was not being met with export earnings and remittances. As a result, dollars were paid from the reserve. which is still being offered. But now, due to the reduction of prices in the international market and import controls, imports are being met with remittances and export dollars. But import arrears and deferred foreign debt are not being repaid. For this, dollars have to be paid from the reserve. As a result, the reserve is decreasing. On the other hand, they cannot buy dollars from the market. As a result, dollars are not being added to the reserve.
According to the report, in 2015, the central bank bought $4.55 billion from the banks and added to the reserves. In contrast, it did not sell any dollars from reserves. In 2016, it bought $388.1 million, but sold only $8 million against it.
In 2017, it sold $123 million from reserves, reducing foreign exchange earnings and increasing import costs. In contrast, only $4.5 million were bought from the banks. In 2018 also, due to the same reason, no dollar could be purchased from the market. In that year, it sold $229.2 million from the reserve. In 2019 also, no dollar was bought against the sale of $162.1 crore.
In 2020, the import decreased completely due to Corona. In contrast, remittances came in at record levels. As a result, the central bank bought record amounts of dollars from commercial banks. That year it bought a maximum of $636.80 crore. In contrast, it sold only $664 million. In 2021, it sold $248.3 million against buying $265 million.
In 2022, when the dollar crisis became apparent, a record amount of $1,294 million was sold from the reserve. No dollars bought. As a result, no dollar is added to the reserves from foreign exchange earnings for an average year and a half. However, the money received from foreign currency loans is added to the reserves. In the last one year, the foreign debt concession has decreased by $144 billion.
After the Corona, the demand increased suddenly, the import cost increased by 53 percent in 2021. In 2022, imports were heavily curbed due to the global recession, which increased commodity prices in the international market and the dollar in the domestic market. Still, the cost of imports increased by 23 percent. Exports and remittances have not increased in proportion to the increase in expenditure. As a result, there is a deficit in the flow of dollars. which is still ongoing.
In January 2018, the dollar was Tk 82.90. In August it stopped at Tk 109.50. At that time, the price of the dollar increased by Tk 26.60. The value of the dollar remained stable from 2018 to 2021. In 2020, the price of dollar decreased by 10 paise. In the rest of the years it increased. It became unstable in 2022. At the beginning of that year, the price of the dollar was Tk 85.80. Now after a year and a half it is now Tk 109.50. In some cases more.
Among foreign exchange earnings, remittance growth averaged 18 percent in 2019 and 2020. In 2021 it decreased by only 1.5 percent and in 2022 it decreased by 3.5 percent. In the last financial year, export revenue increased by only 6.5 percent year-on-year. It was up 34.5 percent in the previous financial year.
In December 2019, import expenditure was $450 million, in the same month of 2019 it was $460 million, in this month of 2020 it was $470 million. In December 2021, it increased to $7.4 billion. After controlling for 2022, import spending in December was $5.2 billion. In August of that year, the highest import expenditure exceeded $850 million. In June, the import expenditure was about $5 billion.
Since 2007, the country’s reserves have been increasing. Although it did drop a bit at times, it was never a cause for concern. But this time it has become a cause of great concern. Reserves in December 2018 were $3 thousand. Which is equal to the import bills of 5.2 months. In 2019, it increased to $3.27 billion. Which is equal to the import cost of 5 and a half months of that time. In 2020 it was $4320 million. With which the import expenses of 5 and a half months of that time could be met.
In 2021, the reserve increased to $4,620 million dollars. Which is equal to 6 months import cost. In August of that year, the reserves rose to a maximum of $4,806 million. In 2022 it decreased to $3.37 billion. Which is equal to 5 and a half months import cost at that time. Now it is further reduced to net reserves of $2,314 million. With which it will be possible to meet the import expenses of less than 3 months controlled.

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