PM’s adviser Salman says government austerity measures are bearing fruit
“This [imports] was $8 billion a month, which fell to $7 billion last month and $6 billion this month. I think our problems will be solved very soon,” he said, speaking to
to reporters after meeting a team from the visiting Uzbek delegation at a hotel in Dhaka on Friday.
“the Prime Minister [Sheikh Hasina] took proactive initiatives to protect the economy during the pandemic and did the same when dollar prices began to soar. At the same time, Bangladesh Bank has taken initiatives to reduce imports at the right time.
Salman, a leading industrialist, believes Dhaka’s attempt to secure a $4.5 billion loan from the International Monetary Fund, or IMF, is part of the process.
He also said the greenback was strengthening against all currencies due to the U.S. Federal Reserve’s policy reversal of raising interest rates, which Salman said will hurt the U.S. economy further. long term.
“The Fed [Federal Reserve] increases the interest rate to avoid a recession. I don’t think that will help [the American economy] at the end. They could enter a recession by raising interest rates. We are already seeing signs of this. The upward trend of the dollar price spike will stabilize by the end of this year,” Salman predicted.
The Bangladeshi taka has been in freefall against the US dollar since April as soon as news of a depleted foreign exchange reserve came out.
As soon as the economy recovered after the post-pandemic reopening, import costs skyrocketed massively and burnout occurred due to a large discrepancy between the amounts paid for imports through letters of credit and the cumulative inflow of foreign currency through exports and remittances. .
For the first two months, the central bank imposed strict controls on the dollar exchange rate, with a system called the “managed exchange rate or floor rate”. But eventually he backed off and reintroduced a floating exchange rate system.
However, the increase in US dollar prices essentially kept the devaluing taka rate even with the reinstatement of the floating system.
Analysts believe that since the main supplier of US dollars, Bangladesh Bank, is increasing the price of selling the greenback to local banks, it is unlikely that the price of the US dollar will fall anytime soon.
The devaluations sent the forex market somewhat into a spiral, with dollar prices rising significantly. At one point last month, exchangers outside the formal banking system were selling a dollar for over Tk 112, the highest in Bangladeshi history.
As a result, analysts said, banks struggled to provide enough US dollars to pay import costs, and the situation simultaneously caused exporters to delay collecting their earnings, leading to a mismatch between supply and demand.
Then in mid-April, Bangladesh Bank tightened the import. The government has also introduced a series of austerity measures to reduce spending.