Taka devalued 9.2% against dollar in FY22

The Bangladeshi Taka was devalued by 9.2 per cent against the US dollar in the just-concluded fiscal year 2021-22, the highest among many other developing nations in Asia.

The inter-bank exchange rate stood at Tk 93.45 per dollar on Thursday.

The Bangladesh Bank data shows the Malaysian ringgit was depreciated by 5.6 per cent in FY22, followed by the Indian Rupee (4.8 per cent), the Chinese renminbi (3.5 per cent), and the Indonesian rupiah (2 per cent).

However, the currencies of Cambodia and Vietnam appreciated against the dollar during this period – the Cambodian riel by 0.2 per cent and the Vietnamese dong by 0.3 per cent.

The growing current account balance deficit exerted an intense depreciating pressure with some volatility on the BDT-USD exchange rate, said the central bank in its monetary policy for FY23 unveiled on Thursday.

“To mitigate the depreciating pressure and exchange rate volatility, the Bangladesh Bank intervened in the local foreign exchange market throughout the year to ensure a market-aligned competitive rate.”

It further said, “As per available data, the Bangladesh Bank sold around $7.3 billion (net) during FY22 (up to June 28) while it bought $7.7 billion (net) during last year.

“As of June 28, 2022, the Bangladesh Bank’s foreign exchange reserves stood at $41.9 billion compared with $46.4 billion at the end of June 2021.”

The changes in the Nominal Effective Exchange Rate (NEER) index indicate the exchange rate of Taka remained slightly undervalued while the Real Effective Exchange Rate (REER) index shows it was highly overvalued till June 2022.

This was due to wide price differentials between Bangladesh and the major trading partners, mainly developed and emerging economies.

In FY22, the NEER of Taka was Tk 116.2 against the dollar while REER was Tk 98.8. Based on the latest available data, the central bank projected the current depreciating pressure on the BDT-USD exchange rate will become stable in the coming months.