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The government is getting increasingly worried over devaluation of taka as the Bangladeshi currency dropped its value 21 percent against US dollar in past one year.
Bangladesh and other South Asian countries are trying to decide on a swap arrangement as those countries are seeing depreciation of their currencies, too.
On Thursday, foreign bank HSBC sold a US dollar at Tk 85. The rate was Tk 85.55 on Monday.
Privately-owned Uttara Bank, too, sold a US dollar at Tk 85 on Thursday while state-owned Sonali Bank sold it at Tk 84.7 and bought at Tk 83.7.
A dollar had been exchanged for Tk 70-70.25 only a year ago.
Finance minister A M A Muhith considers the devaluation of taka against dollar as the reason behind growing inflation.
"We are really concerned over the value of taka. Not only in Bangladesh, currencies of India, Pakistan and other SAARC countries are also depreciating.
"Our economy is based on import. We have to meet our demands for commodities through imports. So prices of products increase when value of the dollar rises. It also raises inflation," Muhith told bdnews24.com.
Growing inflation is proving difficult to rein in even after the government took several measures to tame it and the agricultural production has been the highest in years, the minister said.
"Prices of fuel oil and all other products are increasing due to the rise in the dollar's value. So, inflation is not dropping to a tolerable rate."
Muhith, however, expressed his hope that inflation will subsequently fall.
"Food inflation is decreasing. The rate of inflation (food) has dropped to 10.63 percent in December, since it was pegged at 11.97 percent in September. This trend will continue," he said.
"We (SAARC finance ministers) have discussed a lot about currency devaluation and we all are worried about the matter," Muhith told a press briefing after the conclusion of the fifth SAARC finance ministers' meeting in Dhaka last week.
"India proposed swap arrangement among the SAARC countries. The rest have agreed," he said.
The arrangement may be launched next year, he added.
SWAP is an agreement between the central banks whereby any of the participating institutions can borrow a foreign currency from one of the other ones in order to buy its own domestic currency on the open market. This arrangement is intended to provide a back-stop line of funding to meet any adverse developments in the balance of payments till longer term arrangements are made or if there is a need for short term liquidity due to market turbulence.
Zaid Bakht, a senior researcher with the Bangladesh Institute of Development Studies (BIDS), warned the government that the devaluation impacts investments alongside inflation negatively.
"Import costs have increased since the dollar has gained. Entrepreneurs have reduced import of capital machineries and industrial raw materials. That will reduce industrial production as well as growth in the industrial sector, impacting investment, economy," Bakht elaborated.
The researcher had his concerns over the continuing devaluation of taka against dollar, saying that the 7 percent GDP growth targeted in budget might be hard to achieve if the trend continues.
According to the Bangladesh Bureau of Statistics (BBS), the point-to-point inflation (monthly-based) was 10.63 percent in December. Inflation has remained in the double-digits for the last 10 months.
