The Bangladesh Bank (BB) has raised the crawling-peg rate by Tk 2, bringing it from Tk 117 to Tk 119 in a move aimed at managing the dollar exchange rate.
According to the central bank, an additional 2.5 per cent may be applied when purchasing foreign remittances, while banks are permitted to add another 1 per cent as profit during sales.
Strict regulatory instructions have been issued to ensure that these limits are not exceeded, officials said. Economists, however, remain sceptical of the effectiveness of this measure in stabilising the dollar market.
Dr. Mashrur Reza, chairman Policy Exchange Bangladesh (PEB) and former economist at IFC, a concern of the World Bank, told UNB that it is never possible to stabilise the dollar market if the dollar price is determined this way.
He suggested fixing exchange rate based on competitive market demand to bring stability in foreign exchange.
He also emphasised central bank monitoring on illegal dollar trading and large amount of dollars smuggling in guise of individual travel abroad. Besides, over invoice to import goods is to be checked to bring stability in the domestic foreign exchange market, he pointed out.
Economists argue that maintaining the dollar's value in this manner may not yield the desired results, citing past government failures in controlling the exchange rate. Over time, the dollar's value has surged from Tk 84 to Tk 123 due to continued increases.
Despite these challenges, the central bank has persisted with its regulatory approach to determine the exchange rate.
Introduction of Crawling Peg System On May 8, the central bank introduced the crawling peg system for determining the dollar's price.
At that time, the official exchange rate was raised sharply, from Tk 110 to Tk 117 in a single day. Under the crawling peg system, the dollar's price is allowed to fluctuate within a predefined range, taking various economic factors into account.
Central bank officials explained that this system prevents sudden and significant fluctuations in the dollar's value by setting an intermediate limit rather than strict upper and lower thresholds. —UNB
