Without too much fuss and bother, the greenback has been allowed to appreciate, a move exporters will welcome. Having been pegged around the Tk 80 mark for a fairly long time, a three to four Taka increase in the curb rate points to either pressure for the currency or an intentional slide agreed on. Either way there has been no official statement.
Depreciation works well when exports to sluggish economies are concerned. More bang to the buck is welcome. Imports, slow for quite a while are beginning to pick up and a lower official Taka to the dollar becomes useful.
Europe is one of the, if not the largest export destination for Bangladesh, mainly readymade garments (RMG). The stagnant to declining consumer spend environment in the UK is conducive to a more expensive dollar though it is a balance that is precarious. Inflation isn't necessarily bad; it's whether the reins are of sufficient slack that is the worry. As of now it would seem so. The garments manufacturers would like depreciation to be a constant. That is a half-thought through concept. Money in the hands of labourers has to buy more rather than less. Depreciation increases cost of imports and impacts local inflation beyond the threshold of tolerance. Foreign exchange reserves have been fairly comfortable, notwithstanding the huge and ugly loss through the famous hack. Each quarter a payout to Asian Clearing Union (ACU) depletes the reserve but Bangladesh has never defaulted in loan re-payments, unlike the local businesses that make a fashion of it. That's much more than can be said about economies bigger and stronger than ours. However, suspicion points towards unofficial trade through murky channels that suggest it's easy to transact in foreign exchange. Repugnant though, the idea maybe informal trade channels continue to thrive. At times official trade channels are used as s camouflage, especially in unofficial border trade. That's another of the 'overlooked' factors that help prop up an otherwise unstable economy where locally produced onions are dearer than that which comes from India.
Within trade unions such realities are part of the cost of remaining together. One calculation has pegged imported orange juice from non-European Union (EU) sources to be cheaper than EU sourced ones. Indian jute somehow gets exported at rates cheaper than Bangladesh. Yet, India is one of the largest importers of Bangladeshi jute, officially or otherwise. Going by 'joining' rather than 'beating them', Prime Minister Sheikh Hasina has been emphasising on innovative use of jute. With proper research and planning, robust and imaginative marketing and realistic policies and incentives, could revive the flagging industry. Times have changed. It's more like a diversified end-product than the raw basics that are in demand.
As always, fiscal and monetary policies require delicate balancing acts. Neither extreme is good or preferable. As we head to the new fiscal it might not be a bad idea to flush out the adequacy or not of foreign exchange as a stake-in-the-sand milepost from savings in the petroleum and other sectors.
© 2024 - All Rights with The Financial Express
