The devaluation of the local currency taka against the US dollar has continued after losing its value by 26.1 per cent in the financial year 2022-23, the highest in 46 years.The Bangladeshi currency also lost 1.8 per cent more in value against the dollar until September 7 in FY 24, as the interbank exchange rate for the dollar went up to Tk 110 from Tk 108.

Economists said that FY23 was the most inauspicious financial year for the local currency in many years, which exposed economic weaknesses, dollar shortages, and a price spiral for essentials.

The previous highest devaluation of 71 per cent took place in the financial year 1974–75 when the price of a dollar went up to Tk 15.95 from Tk 8.8 in the previous financial year.According to the Economic Review 2023, the taka also devalued by 23.44 per cent in 1980–1981, when the price of the dollar increased to Tk 20.06 from Tk 16.25. Devaluation of the local currency by large margins also occurred in 1981–1982 (18.59 per cent), 1994–1985 (15.10) and 2020–2011 (11.8 per cent).

Former Bangladesh Bank governor Salehuddin Ahmed blamed wrong economic policies for the devaluation of the local currency by a large margin over the past 14 months.

The present government tried to keep the value of the taka high artificially but failed, he said.

Bangladesh Bank sold around $7.6 billion in FY22 to prevent the depreciation of the taka while many countries, including India, depreciated their currencies in response to the interest rate hike by the US Fed in March 2022.

In FY23, BB also injected a record $13.5 billion into the market but could not check the second-biggest devaluation in the country’s history.Policy Research Institute executive director Ahsan H Mansur said that the depreciation of the local currency was due even before the Covid-19 pandemic.

Allowing gradual depreciation could have been more beneficial for the economy, he said.The country’s economy, according to economists, has been facing its worst-ever crisis amid prolonged shortages of the dollar as well as high inflation.The country has been struggling to keep forex reserves equivalent to

import payments for three months.The country’s gross foreign exchange reserves are likely to drop further in the current week from $23.06 billion with the import payment of $1.2 billion to the Asian Clearing Union.

The growth of exports, one of the two major sources of foreign currencies, was a paltry 3 per cent in August, while remittances, another source of forex reserves, were six months low at $1.6 billion in August.

The government has secured a $4.7 billion loan package from the International Monetary Fund, and BB has restricted the import of many products to shield forex reserves.

Economists said that the devaluation of the local currency had also increased inflation and put the majority of people under stress.

The average inflation rate in FY 23 hit a 12-year high of 9.02 per cent.

In 2010-11, inflation was recorded at 10.92 per cent.

The FY23 average inflation rate was much higher than the original target of 5.6 per cent set by finance minister AHM Mustafa Kamal while announcing the national budget for FY23 in parliament.