Weak Taka To Keep Bangladeshi RMG Export Competitive

Market Intelligence

Weak Taka To Keep Bangladeshi RMG Export Competitive

Bangladesh after a prolonged tryst with a steady exchange rate between BDT (Taka) and the US dollar, has witnessed a gradual depreciation of its currency against the US dollar since the last six months. This trend has been visible ever since the last quarter of 2016 or to be precise from the starting of November 2016. A weak BDT against the greenback is is obvioiusly a good news for the booming RMG exporters as it would ensure competitiveness of the merchandise in the international markets.

Bangladeshi Taka's exchange rate was hovering around BDT 77-78 against the greenback for most of 2016 but started depriciating since November 2016. As of January 1, 2017 one US dollar stood at 79.365 BDT. By February the US dollar strengthened to 80 BDT. However, in April the US dollar further strengthened and exchange rate touched BDT 84.25 This was almost near to the all time high exchange rate of BDT 84.46 that was witnessed in February 2012. The exchnage rate has however, slipped gradually from the peak and traded between BDT 81-82 against the greenback.

Industry sources said, “The upward movement of the US dollar on the global scale was largely because of the gap between the supply and demand for the currency. While demand for the currency as reserve has increased, the supply of US dollars in the global market has not grown siginificantly.”

Bangladesh, besides foreign currency earnings from its exports of textiles and other fronts, heeavily depends on the inward remittances from large diasporas. It assists Bangladesh in maintaining a positive balance of payments which has taken a beating since last year, with a pronounced decline during the July-April period of 2016. The decline registered was significant as compared to the same period in the year 2015. This was disclosed by the data sheets coming from the Bangladesh Bank. Gross foreign currency reserve has been healthy at US$ 32,518.8 million as disclosed by Bangladesh Bank in April 2017.

The depreciating BDT has obviously made way for celebratory calls from the RMG exporters and remitters. The sentiment was echoed by a garment exporter from Dhaka “A stronger dollar will help exporters and remitters.” Banking sources from Bangladesh also confirmed the advantages of weak local currency, stating, “The depreciation of local currency is a market driven. Weak currency would bring relief to exporters whose competitive advantage has been eroding over the past year due to the currency tends in the global market against the greenbacks.”

Last year, London-based BMI Research said that Bangladesh Bank could be pressured to allow the currency to weaken since strong BDT would damage Bangladesh's export competitiveness, which is highly dependent on the country's cost advantage. Bangladesh exported US$ 28.1 billion worth of apparels in the last fiscal (2015-16) and is expected to exceed the US$ 30 billion mark during the current financial year.