Dollar crisis and exchange rate
The banks are reporting a shortage of dollars, which is making it difficult for them to make payments for imports. It has been obvious for years that Bangladesh would suffer a foreign exchange crisis in 2005. We all knew that the Multi-Fibre Arrangement (MFA) would expire this year, making it difficult for Bangladeshi garments manufacturers to compete with Chinese manufacturers. We knew that this would reduce our garments exports and hence our inflows of foreign exchange. What we did not know is that petroleum prices would be so high for so long in 2005. In addition to fall in garments exports we are faced with bigger bills for petroleum imports.
There is only one way for the banks to deal with this. They must continue to raise the value of the dollar in relation to the taka. This will discourage imports of non-essential goods (goods other than petroleum and industrial raw materials). It will also help the garment exporters to compete with Chinese manufacturers. The taka will have to continue depreciating until the supply of dollars (from exports) is equal to the demand for dollars (to pay for imports).
We hope that the Bangladesh Bank and the finance ministry will not hinder the banks as they carry out the necessary depreciation of the taka.
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