Jaren Tasnim Any: Bangladesh has been experienced a Dollar crisis since last year. A Dollar crisis happens when the value of a country’s currency falls sharply, making it harder for people to buy things. The rise in the value of the Dollar caused a change in how much Bangladesh imports and exports. As the exchange rate of the Dollar increased due to the decrease in export earnings and remittances, on the other hand, the Dollar crisis was created in the banks.There are many reasons behind the Dollar crisis in Bangladesh and the global crisis is mostly responsible for that. Such as the import-export shortfall, the war between Russia and Ukraine, the increment in military spending by united states and allied countries, the financial and commercial barricade force by United States on different nations including Russia, increment in foil oil costs, and diminished supply, storing the additional Dollars by trader hoping to make extra ordinary profit etc.
Bangladesh government tried to keep the issue of Dollarcrisis a secret in the beginning, but the issue is no longer a secret, it is being openly discussed in almost everywhere. Although the government named the Dollar crisis as a seasonal problem, but it is basically a structural problem. So, the problem is unlikely to be resolved very quickly. Because Dollar is not being earned at the rate at which it is being spent. For example, Bangladesh spends a lot of Dollar on importing machinery and mechanical equipment, electrical equipment, mineral products, vegetable products, metals products, chemical and allied products, vehicles, aircraft, etc. Currently, due to the Russia-Ukraine war, global import costs have increased. Therefore, the government has to spend more Dollar than before to import machinery, raw materials and other goods for various types of mega projects of the country. As a result, import costs are increasing and Dollar reserves are gradually decreasing. Therefore, strong Dollar reserves are needed to keep foreign imports dynamic.
Among the major Dollar earning sectors are agriculture, garments, remittances and foreign credit. About 90 percent of the total dollar come from garments and remittances. But now the severe global economic recession has also affected agriculture, garments and remittances. As a result, the government is now resorting to foreign debt to increase the amount of Dollar. To earn Dollar, the government is being prepared to take a loan of 4.5 billion dollar from the IMF under certain conditions. A loan from the IMF may bring some relief but will not solve. The solution requires changes in the export sector, and requires a number of important simultaneousactions.Though there wasa confusion about the exact amount of reserves in Bangladesh, but now it has been disclosed that Bangladesh’s gross reserves are now 34.3 billion Dollars. Andfrom there, 8 billion Dollars will be excluded, that is the net reserve. So, the amount of reserves in the country is 26.3 billion dollar. Regarding the plight of the Dollar crisis, the governor of central bank said, “This crisis will be over by January. But reality is; this is a structural crisis, there is no chance of it going away too soon.
Even in 2023, it is feared that the Dollar crisis will be remaining. Because, at the beginning of the new year, it is seen that a kind of depression has been created in the world market. Forecasts by various international organizations show that major international markets, especially North America and European countries may experience a recession. Even economies like China are showing signs of contraction. Moreover, the Russia-Ukraine war has not been over yet. In this situation, on the one hand, there are fears for the economy of Bangladesh, especially since the two major centers of Bangladesh’s export market are North America and Europe. If a recession occurs in these countries and persists for a long time, then there may be a negative impact on Bangladesh’s exports.
While the Dollar crisis has had an impact on the global situation, government ambitions and negligence can largely be blamed. So, mega projects that are almost at the end, or very useful ones should be kept on and unnecessary projects should be slowed down. This will reduce the pressure on Dollar.To stabilize the Dollar rate, government must be taken necessary steps such as; setting up the separate fund for government import such as foil, reducing the percentage of current Net Open Position (NOP) of banks to inject forex flow into the market, restricted Import of luxury items till the situation improves, improve the remittance flow, increasing the value of taka closer to the interbank rate etc.The central bank should also start testing out invoicing in multiple currencies to help reduce the demand for the Dollar.
Rapid action should be taken against those who are known to be involved in money laundering. Bangladesh Bank, Ministry of Finance, Ministry of Commerce, NBR and law enforcement agencies especially ACC must work together to prevent this from happening in the future. Otherwise, it will be difficult to deal with economic problems.In particular, the rate of inflation should be brought down. The social security program of the government needs to be expanded. There are various problems with this social protection program, especially corruption, institutional weakness, and enrollment errors—these need to be addressed. Besides, we have to look at the problems which have been prevailing for a long time in some parts of the macro economy.Tax sector, banking sector, trade policy, currency exchange rate—these sectors need reforms. If such reforms are done, Bangladesh can achieve the ability to prevent various conflicts. It is expected that even if there is a new crisis in the coming days, the economy will not be in such an unstable condition.
