At present, dollar rate has rapidly been increasing in Bangladesh due to shortage of dollars reserve, especially for Ukraine- Russian war. No doubt, deflating the local currency against dollars is a dangerous sign for Bangladesh. For a mentionable time, dollar rate has remained within 82tk to 85tk. Recently, one dollar equals to 113tk or more due to scarcity of dollar reserve.
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Why dollar rate increased so high against Tk?
Nowadays, many newspapers have reported differently about foreign currency reserve in Bangladesh. But government said we can afford 9 months import by existing forex reserve. The actual scenario creates deteriorate situation among citizen of Bangladesh. Because of decreasing foreign currency reserve day by day, the dollar rate is increasing. It has a demand and supply relation.
Impact of devaluation Tk
Suppose, a company manufacture Plastic Items. Plastic raw materials (Varies grade PP and Pigment) are used for manufacturing plastic items. Bangladesh completely depends on import for plastic raw materials. Hence, plastic manufactures have to open L.C (Letter of Credit) to purchase raw material from Saudi Arab or other countries.
How much dollar rate increased?
Previously, 1 dollar equal to 85tk. Now 1 dollar equal to 115tk. Dollar rate increase 35% (115-85)/85. So, a manufacturer has to add at least 35% cost with final product just for tk devaluation against dollar.
Will the consumers accept unusual high price for plastic items? No. In instable economy, consumers also follow precautionary step by cut short of nonessential products. So, they try to avoid buying rather they prefer to save money for rainy days.
If the plastic manufacturers cannot sale final products, they will face difficulty to survive. As a result, company will stop production. Employers will lay-off, dismiss or discharge many employees from jobs.
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This is just an illustration. Bangladesh is import oriented country. Even for garments manufacturing, Bangladesh depends on import for raw material.
Thus, in the long run, Bangladesh economy will face at dangerous situation unless the present situation will improve.
Will Bangladesh become Sri Lanka?
May be “NO”. Bangladesh is an agricultural country. In any dire situation, only food can save from famine. Government should give special care for agriculture. Moreover, government should stop mega projects as most of the mega projects’ building materials are import from foreign countries. In this way, dollars are going to other countries.
As a result, dollar rate becomes high. Moreover, money laundering is a big issue to decrease the forex reserve. Government surveillance on L.C- specially to find out over and under invoice- can prevent money laundering.
Probable Solution
Two ways Bangladesh collect the maximum amount of dollars: remittance and export of garments items. Considering the current situation, Bangladesh should put extra emphasis on remittance and export. Import of nonessential goods must be banned until the present situation will improve.
Moreover, government should practice zero tolerance principle for money laundering by any means. On the other hand, corruption must be controlled to a tolerant level. Government can stop raw materials purchase at dollars for mega projects.
Founder of The Financial Ask
