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Gradual rate adjustment would have softened dollar blow: Mashiur

Published : Friday, 3 May, 2024 at 12:00 AM  Count : 179
Bangladesh has been facing a shortage of dollars since economic activities bolstered after the coronavirus pandemic
If the Bangladesh Bank gradually adjusted the value of the taka against the US dollar instead of maintaining a fixed rate for an extended period, it could have mitigated the impact of the dollar shortage on businesses, Mashiur Rahman has said.    
The prime ministers economic affairs adviser made the remarks at a seminar titled Bangladeshs Domestic Resource Mobilisation: Imperatives and a Roadmap, organised by the Policy Research Institute in Dhaka on Tuesday.  
Bangladesh has been grappling with a shortage of dollars since the economy picked up pace following the coronavirus pandemic.
Its foreign currency reserves have shrunken below $20 billion now in line with the International Monetary Funds BPM-6 method from nearly $50 billion during the pandemic.
The taka has continued to weaken against the US dollar and depreciated by 30.36 percent in the past three years.
After the Bangladesh Bank reintroduced market-based rates fixed by banks and dealers, the importers are paying Tk 115-116 per dollar or more now.
The devaluation of the taka caused the most damage to entrepreneurs, claimed Mahbubul Alam, president of the Federation of Bangladesh Chamber of Commerce and Industry.
"The government needs to think about how to cover our losses while the dollar crisis persists," he said at the seminar.
Mashiur said the businesses would have got an idea about the crisis had the Bangladesh Bank allowed the readjustment of the taka-dollar rate gradually. "As it was not done, the pressure increased at a time in the past few years."
"A gradual readjustment would have made the pressure tolerable for the businesses and the economy. They would not have felt so much pressure now," the adviser argued.
He said Bangladesh could have taken a policy of devaluing the local currency against the dollar like many other economies in the world.
The FBCCI president also said a rise in interest rates to 14.5 percent after the central bank removed a cap at 9 percent has led to an operational cost hike for the businesses.
Mashiur said the ruling Awami Leagues election manifesto mentioned that interests will be in line with the central banks policy rate, not fixed.
Currently the interest rates are determined on the Six Months Moving Average Rate of Treasury Bills. The banks add margins to the rate to set interests.
In the keynote, PRI Executive Director Ahsan H Mansur emphasised increasing the ratio of revenue to GDP, which is currently around 8 percent.
"Bangladesh is going to achieve the middle-income country status with such a capacity of revenue collection that is very risky. In the future, the governments cost will increase because of domestic and foreign loan interest payments, salary increase of officials, subsidies and pensions. If revenue collection is not increased to meet this additional expenditure, the economy will be at risk," he said.
Reforms to the tax structure and the National Board of Revenue or NBR, and implementation of the IMFs reform programme in the financial sector can generate additional revenue of Tk 600 billion in the next four years, according to him.
"If comprehensive reforms are not implemented, there will be a revenue loss of Tk 5 trillion by the end of 2041. Greater revenue generation is essential to invest in macroeconomic stability and long-term development."
Citing research, he said it is possible to increase the amount of revenue collection by at least 60 percent through the development of tax management.
    —bdnews24.com



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