Bangladesh to adopt market-based floating exchange rate to rein in foreign-exchange volatility
DHAKA — Bangladesh is going to adopt the market-based floating exchange rate of the U.S. dollar against the Bangladeshi taka soon, said Bangladeshi Finance Minister AHM Mustafa Kamal on Wednesday.
After a virtual meeting of a cabinet committee, he told journalists in Dhaka “We’re all set to introduce the market-based floating exchange rate soon.”
The latest decision came days after the central bank of Bangladesh asked the banks in the country to fix the maximum exchange rates of the U.S. dollar against the Bangladeshi taka for export-import bills and remittances, in a bid to ease pressure on foreign exchange reserves and end volatility in the forex market.
“We’ve to follow the global practice to set the exchange rate,” he said as the buying and selling rates of the each Greenback soared to 102.37 taka-106.90 taka in contrast to about 95 taka days earlier.
The minister expressed the hope that the move will help bring back stability in the country’s foreign exchange market.
In its bid to boost the shrinking forex reserves, the central bank of Bangladesh in recent months has taken various measures to discourage imports and woo more remittances from millions of Bangladeshi people living and working abroad.
Bangladesh’s forex reserves fell to over 37.0 billion dollars last Thursday after making a routine payment worth 1.73 billion dollars to the Asian Clearing Union against imports made during the July-August period.
The country’s forex reserves surpassed the 48-billion-dollars mark in August last year, the highest ever in history, due to a slowdown in imports and rising remittance and export earnings during the COVID-19 pandemic.