Taka losing ground

December 20, 2011

The taka continues to slide against the dollar putting further pressure on soaring inflation.

The call money rate, which is an overnight market to serve commercial banks in meeting their immediate liquidity needs and reserve deficiencies, is also going up, ignoring the central bank’s cap of 20 percent, bankers said.

According to Bangladesh Foreign Exchange Dealers Association (BAFEDA), the price of the dollar at customer level (import payments) was highest at Tk 81.60 quoted by Habib Bank yesterday. The average rate was Tk 81.07.

The inter-bank exchange rate (also known as wholesale rate) was nearly Tk 81 a dollar yesterday.

“The real rate is higher by 20-30 paisa per dollar than the quoted price,” said a treasury official of a private commercial bank.

Quoted rate is the indicative price and the banks have right to charge more, said the official.

The taka has depreciated by 13 percent against the greenback (dollar) since January this year. In the beginning of 2011, the US dollar was sold at Tk 71 for import payments. The exchange rate was Tk 69.34 in June last year.

Analysts said the country is importing inflation with the continued depreciation of the taka meaning, what Bangladesh could have bought by Tk 71 a year ago now costs it Tk 81 plus.

Point-to-point inflation reached nearly 12 percent and the finance minister for the first time admitted that inflation is posing a big challenge for the economy.

The inter-bank call money market has also been showing an upward trend for the past few weeks.

Treasury officials said many banks do not follow the Bangladesh Bank-set cap of 20 percent for the call money rate.

They said some banks settled proposals at 40 percent, but told the central bank it was 20 percent.

“Some banks are concealing facts…it’s a bad practice for the industry,” said an in-charge of a bank’s treasury department. “We’ve told the BB about our concern,” he added.

But bankers questioned the central bank’s role in repo support, especially to the primary dealer (PD) banks that get much less money against their demands.

Taka losing ground

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