Exchange rate remains stable

The exchange rate has remained stable despite an increase in imports due to adequate liquidity and timely intervention in the foreign exchange market, the central bank said.

The disclosure came at the meeting of the fiscal coordination council last week, a finance ministry official said.

Thanks to the satisfactory remittance growth, there is no possibility of a big depreciation of the taka against the dollar in the near future, according to Bangladesh Bank.

Timely intervention means BB purchases dollar from the forex market so that the taka does not appreciate much and exporters and remitters are not affected, a central bank official told The Daily Star.

On the other hand, if the taka depreciates much the price of import items would go up, fuelling inflation.

BB purchased dollar from the forex market most of the time. At the end of last year, investment picked up and the demand for dollar went up, the official said. To prevent quick depreciation of the taka against the dollar, the central bank sold dollar in the forex market.

Despite high import growth, the taka depreciated only 1.67 percent against the dollar in the last one year, according to a BB report. On April 5, the average exchange rate was Tk 77.80, which was Tk 77.67 one year back.

To keep the exchange rate stable, BB purchased $2.51 billion from the forex market from July last year to March this year.

At the same time, the central bank sold $357 million to the market to stabilise the exchange rate.

The central bank official said, during November-December last year there was a great demand for dollar in the forex market. At the time, the central bank started selling dollar.

In the first eight months of the current fiscal year, import grew 14.2 percent and export 2.4 percent, according to central bank statistics.

Despite the huge mismatch in export and import growth at the end of February, the deficit in the current account compared to that in January decreased around 20 percent.

On February 28, the current account deficit stood at $1.10 billion, which reached $1.36 billion on January 31.

Though export growth was slow, since the remittance and foreign direct investment were high, the foreign currency reserves were satisfactory.

In the first eight months, remittance grew 7.62 percent, which declined 6.93 percent in the same period last fiscal year.

During the same period, FDI rose 7.15 percent.

On April 2, reserves were $23.19 billion, enough to foot six months' import bill.

At the end of June last year, the reserves were $21.55 billion.

As imports increased more than exports, in the revised budget the target of forex reserves was also cut down.

The budget made a projection that at the end of the fiscal year, forex reserves would stand at $25.7 billion. But in the revised budget it has been lowered to $22.5 billion.