Bangladesh Moves Toward Floating Rate With 11% Drop In Taka
Bangladesh loosened its grip on its currency and allowed the taka to weaken to a record low to preserve dwindling dollars.
(Bloomberg) -- Bangladesh loosened its grip on its currency and allowed the taka to weaken to a record low to preserve dwindling dollars.
The taka fell to as low as 106.9 per dollar on Tuesday, according to data from the central bank. It has lost 11% of its value this week.
“Bangladesh will gradually go for the floating exchange rate,” Finance Minister AHM Mustafa Kamal said at a media briefing in Dhaka on Wednesday. “ Demand and supply will determine the price of the currency. We’ll follow what other developing economies are doing.”
The central bank spokesman Serajul Islam declined to comment.
Bangladesh is struggling to protect its foreign-exchange reserves as surging import costs erode the stockpile. Prime Minister Sheikh Hasina’s government is seeking a loan from the International Monetary Fund to create buffers for the economy.
Authorities have implemented power cuts throughout the country and are cracking down on money hoarders amid a dollar shortage. The country’s foreign currency reserves declined to $38.9 billion as of Sept. 7 from $48.1 billion a year earlier, enough to cover roughly four months of imports.
“It’s the road to market-driven rates,” said Syed Mahbubur Rahman, managing director & CEO of Mutual Trust Bank Ltd., referring to the taka’s depreciation. “Banks are now free to determine the rates based on certain parameters.”
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