Bangladesh’s currency taka has weakened further after the central bank, Bangladesh Bank (BB), allowed more flexibility in the exchange of foreign currencies, reflecting a shortage of US dollars in the market. The interbank exchange rate for the dollar has risen to Tk 120, up from Tk 118 just a few days prior. This depreciation follows the BB’s decision on August 18 to widen the band of the crawling peg—a controlled range for exchange rate fluctuations—from 1 % to 2.5 %, aiming to boost foreign currency inflows.
Central bank initially introduced the crawling peg in May 2023, moving away from fixed rates to gradually allow market demand and supply to determine the exchange rate. The taka has significantly lost value over the last two and a half years due to declining foreign exchange reserves.
Banks are buying dollars at higher rates than the official crawling peg rates, sometimes paying up to Tk 120, due to a persistent gap between supply and demand. The central bank has relaxed the rules after discussions with bankers, acknowledging the current exchange rate as acceptable. However, there is growing pressure on banks due to rising import payment obligations, despite a sharp decline in imports over the past two years to conserve forex reserves. Bangladesh’s forex reserves, which peaked at $48 billion in August 2021, have since fallen to $25.92 billion by the end of July 2023.
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