Bangladesh’s central bank decided to allow its currency to float freely for the first time, in a bid to secure fin acing from the International Monetary Fund (IMF) in line with the $4.7 billion loan program.
The country joined a growing list of nations, including Pakistan, Egypt, and Lebanon, that have opted to loosen control over their local currencies to secure financing from the Washington-based lender.
In spite of depreciation concerns, the central bank does not forecast a significant decline in the value of the taka, which has already experienced a slight 5% decline in 2023.
Following the announcement, the taka witnessed a drop of up to 0.9% against the dollar. However, the broader index of the Dhaka Stock Exchange recorded a notable rise of up to 0.3%, the largest gain since June 7.
This step highlights the potential for a looser currency regime to bolster Bangladesh’s reserves by making its exports more attractive.
Bangladesh’s central bank has already sold nearly $13 billion in the current fiscal year (FY) that will end on 30 June 2023 due to increased demand for foreign currency.
The government received the first installment of $476 million from the IMF loans in February, with the second tranche expected in November.