Taka depreciation intensifies amid dollar crisis and reduced remittance inflow

Taka depreciation intensifies amid dollar crisis and reduced remittance inflow

In an attempt to counteract this trend, on October 22, the Bangladesh Foreign Exchange Dealers Association (BAFEDA) and the Association of Bankers, Bangladesh (ABB (ST:ABB)) permitted a 2.5% higher dollar purchase rate from remitters. However, as the Taka continued to depreciate, these bodies increased the dollar purchase rate from exporters to Tk 110.5 on October 31 and enforced regulatory checks on banks’ records.

Despite these measures, allegations of inflated rates and dollar shortages led banking bodies to cap the exchange rate at Tk 115 per US dollar for overseas Bangladeshi workers’ transactions on November 7. This was enacted despite previous offers of up to Tk 124.

The current crisis in the foreign exchange market is further exacerbated by a 4.3% year-on-year decrease in remittance inflow to $6.8 billion in July-October 2023-24, despite government incentives for remitters. Over the past 27 months, the central bank’s divestment of over US $25 billion from its reserves in an attempt to stabilize the foreign exchange market has not been able to offset a sluggish inflow of remittances and export earnings, leading to a depletion of foreign exchange reserves.

From September 2021 to September 2022, amidst a dollar crisis and disparity in dollar supply and demand, the Taka depreciated from Taka 85.5 per dollar to Taka 96 per dollar. This depreciation escalated debt repayment obligations due to US-denominated foreign debt, leading to further economic repercussions.

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