Economy
Moody’s Predicts Further Decline for Bangladesh’s Taka Amid Currency Policy Shift
Bangladesh’s taka is expected to plunge further into record-low territory as the central bank loosens its control over the currency, according to Moody’s Ratings.
Young Kim, an analyst at the rating firm in Singapore, projects that the taka will likely weaken by another 2% to around 120 per dollar by the year’s end. This forecast comes as the currency has been hitting a series of record lows in recent days.
The central bank’s recent introduction of a crawling peg system is anticipated to align the taka’s value more closely with its rate in the unofficial market, Kim explained. This adjustment is part of a broader package of policies recommended by the International Monetary Fund, which provided Bangladesh with a $4.7 billion bailout program last year. This policy shift aims to help the nation prevent further depletion of its foreign exchange reserves—a factor Fitch Ratings cited when it downgraded Bangladesh’s credit score further into junk status in May.
“Most of the pressure for Bangladesh is external, centered around the fixed-exchange rate that caused a distortion between the market and the official rate,” Kim noted. “This significant devaluation of the taka helps reduce some of these imbalances by narrowing that gap.”
In May, the central bank implemented the crawling peg exchange rate system and set the mid-rate at 117 taka per dollar. This move prompted an almost 8% decline in the currency this quarter. On Tuesday, the taka weakened further by 0.3%, reaching 117.7 against the dollar and closing at a new low.
Amidst the currency devaluation, Bangladesh is also cutting spending and raising taxes to narrow the budget deficit and boost revenues, as the country faces a steady erosion of foreign reserves. To curb inflationary pressure, the central bank has transitioned to market-based interest rates, responding to the fastest pace of price increases seen in seven months in May.
The National Board of Revenue (NBR) is preparing to scrutinize government officials suspected of amassing illegal wealth and assets through corrupt practices. This move aligns with the government’s broader goal of creating a corruption-free and fair Bangladesh.
NBR Chairman Md Abdur Rahman Khan, speaking at the inauguration of a recent NBR program, emphasized the importance of this initiative. “We definitely aim to establish a discrimination and corruption-free Bangladesh,” he said, noting that preparations for this effort are already underway. Khan, however, cautioned that the progress of these preparations might not be immediately visible to the public, stating, “You cannot see the move of these preparations from the outside.”
Submission of Wealth Statements by Government Officials
In parallel, Md Mokhles Ur Rahman, Senior Secretary of the Ministry of Public Administration, announced that all government officials and employees must submit their wealth statements by November 30 to their respective ministries and departments. Furthermore, wealth reports will be required annually, with a deadline of December 31 each year.
The submission of these statements is part of a broader government strategy aimed at increasing transparency and accountability. The government has provided a specific format for the wealth declarations, which must be submitted in sealed envelopes to the relevant authorities. Any failure to submit the statement or providing false information will result in legal consequences.
NBR’s Ongoing Preparations
While the NBR chairman did not provide an exact timeline for when actions against corrupt public servants would begin, he reassured the public that the organization is steadily advancing its efforts. “We are putting matters on the right track gradually, placing the right things in the right place,” he remarked, noting that the NBR is currently collecting relevant data on this issue.
Legal Framework and Historical Context
According to the Government Servants (Conduct) Rule, 1979 (amended in 2002), all government servants are required to submit wealth statements when they begin their service and update them every five years. This rule was originally intended to combat corruption and ensure accountability, but it has largely remained limited to paper, with little enforcement. Despite several letters from the ministry over the years, there has been little progress in implementing these regulations.
However, the interim government has recently reinforced these requirements, driven by growing concerns about corruption within the public sector. On August 14, the interim government’s Legal Adviser, Professor Asif Nazrul, announced that all judicial officers and their families must submit both domestic and international asset declarations within 10 working days, following consultations with the Supreme Court.
Widespread Corruption Sparks Action
Allegations of widespread corruption have put the issue of illegal wealth among government employees in the spotlight. This has prompted renewed calls for greater accountability and stricter enforcement of wealth declaration rules to curb corruption within the public sector.
The most pressing challenges facing industries over the past six months have been the scarcity of bank funding and ongoing issues with gas and electricity supply, according to Ashraf Ahmed, President of the Dhaka Chamber of Commerce and Industry (DCCI).
Speaking at a seminar titled “Bi-economic State and Future Outlook of Bangladesh Economy – Private Sector Perspective,” organized by the DCCI on September 28, Ahmed stated, “We are still grappling with gas and electricity shortages. If we cannot address the issues of labour unrest and energy shortages, and fail to keep factories operating continuously for at least four hours a day, it will severely impact exports.”
Ahmed further noted that production in Micro, Small, and Medium Enterprises (MSMEs) is also declining. He warned that if these challenges persist, they would not only affect export levels but also significantly harm employment.
Impact on Non-RMG Sectors and the Importance of Alternative Solutions
The DCCI president emphasized that the crisis extends beyond the ready-made garment (RMG) sector, severely impacting non-RMG sectors as well. “We are already hearing that gas reserves are depleting. However, if the nuclear power plant is connected to the grid by the end of this year, there may be a positive shift. Immediate alternative measures are critical to overcoming this situation,” he added.
Ahmed also highlighted that labour unrest, initially confined to Ashulia, has now spread to other regions, raising concerns about its potential to disrupt industrial stability further.
Threat to Investment and Call for Confidence Restoration
Addressing the broader economic outlook, Ahmed stressed that restoring confidence in resolving the energy and labour crises is vital for maintaining investment levels. He warned that private sector investment growth, which has remained around 24% over the past three to four years, could face setbacks if confidence is not rebuilt.
Financial Reforms and Economic Stability
In his address, Ahmed pointed out that the interim government had proposed several financial reforms aimed at stabilizing the economy. “If these reforms are properly implemented, they will positively influence the economy, although it may take time to see results. Increasing tax revenue is also crucial for improving the government’s capacity to repay international debts, so revenue collection should be prioritized,” he noted.
Ahmed also remarked on Bangladesh Bank’s efforts to curb inflation by raising the policy rate. However, he cautioned that the effects of this measure would take three to six months to materialize. He also highlighted the need for careful handling of reforms in the banking sector, particularly for the 10 to 12 weak banks under scrutiny, to avoid negative consequences for the entire industry.
Recommendations for Industry and MSMEs
In his concluding remarks, the DCCI president recommended that bank loans to the industrial sector and MSMEs should be maintained at a consistent, normal level to ensure the stability and growth of these sectors.
Speakers at a discussion today said all people of the country have the right to seek and receive information from government entities (except those concerning national security) and private authorities to ensure transparency.
The right to access information is an integral part of the right to freedom of thought, conscience, and expression, said the speakers marking International Information Rights Day 2024 at a discussion at the information commission in Dhaka’s Agargaon area.
The speakers said Bangladesh has enacted the Right to Information Act to ensure the free flow of information to establish good governance.
Transparency International Bangladesh (TIB) Executive Director Dr Iftekharuzzaman and Information and Broadcasting Ministry Additional Secretary (secretary in-charge) Md Nazrul Islam spoke the discussion as special guests with Information Commission Director SM Kamrul Islam in the chair.
Directorate of Primary Education Dr Md Abdul Hakim presented the keynote paper while Information Commission Deputy Director Md Salah Uddin gave the welcome address.
They said the act has formed a path for establishing good governance along with ensuring transparency and accountability in the activities of all government and non-government organisations.
The speakers noted that the Information Commission is working relentlessly to bring the benefits of the RTI Act to the doorsteps of the people.
All stakeholders including government entities, and electronic and print media should be involved in creating awareness among people about the RTI, they said.
They also said every government organisation is bound to provide all information that the people have the right to know.
