Bangladesh Taka Case Study

Great Essays
Register to read the introduction… Any rise in the prices of such inputs through devaluation, would raise industrial costs and reduce the intensity of capacity utilisation. Therefore, it should be avoided as a resort to deficit financing. Devaluation with its implications will cause a contraction in economic activity and consequently slide in income tax receipts will raise the burden of Bangladesh's foreign debt overnight. It cannot stop smuggling as long as black-market transactions in foreign exchange continue.

Devaluing Bangladesh Taka means devaluing the price of Bangladeshi labour and talent in the international market that send foreign exchange through home remittance. Devaluation will make Bangladesh lose heavily both as seller and as a buyer and will make no good substitute for remedial changes in economic policies and developmental
…show more content…
However, he told beyondbrics the “3 per cent devaluation was a token gesture” and he “would not rule out further downward moves in the future”.
Ajith Nivard Cabraal, governor of the central bank, confirmed the devaluation would go through on Tuesday – the central bank controls exchange rate movement within a trading band. The rupee is currently trading at Rs110.39 against the dollar.
The devaluation is sure to please the IMF, which in early September remarked that non-borrowed reserves – those not including IMF funds or foreign holdings of treasuries, for example:
[Have] steadily declined, reflecting foreign exchange sales by the Central Bank. This policy does not seem to be in line with the current fundamentals of the economy. In responding to market pressures, the Central Bank should henceforth limit its intervention and allow more exchange rate flexibility. Flexibility in the exchange rate, which has appreciated substantially in real terms over the past two years, is also an essential component in ensuring Sri Lanka’s export competitiveness.
[pic]
Source: Asian Development

Related Documents

  • Improved Essays

    EXTERNAL STABILITY Definition: External stability is an aim of government policy that seeks to promote sustainability on the external accounts so that Australia can service its foreign liabilities in the medium to long term and avoid currency volatility. External stability indicators include the CAD, foreign liabilities and the exchange rate. Measurement, Trends and Current Statistic External stability is measured through an analysis of CAD as a % of GDP, net foreign debt as a % of GDP and fluctuations in the exchange rate. Instability arises when CAD exceeds 3-4% of GDP, net foreign debt is above 40% of GDP and the exchange rate is volatile.…

    • 1514 Words
    • 7 Pages
    Improved Essays
  • Improved Essays

    Australia inflation rate experienced a decrease of 1.7% to 1.3% from the last quarter of 2015 to the first quarter of 2016. Reflecting our relatively low exchange rate of 0.72 relative to the USD. A country terms of trade is a ratio comparing export prices to import prices. If the price of a country’s export price rises by a greater rate than that of its important, its TOT has favourably improved, which tends to show currency appreciation. In contrast a depreciation of the exchange rate would have to opposite effects explained…

    • 1235 Words
    • 5 Pages
    Improved Essays
  • Improved Essays

    Canada Exchange Rates

    • 829 Words
    • 4 Pages

    Exchange rates are important in our world today, since every nation doesn’t have the same type of money and the value is different among the different currencies. Exchange rate for two countries that are trading with each other when it comes to selling products internationally currencies is an important factor. The level of a countries economic health, inflation and interest rates are the most important determinants of exchange rates. It also plays a vital role in the level of trade of a country, nonetheless it is the most analyzed, manipulated and watched economic measures. Currencies have no limits on how they depreciate or appreciate when measured against other countries’ currencies.…

    • 829 Words
    • 4 Pages
    Improved Essays
  • Improved Essays

    Republic Of Haiti Essay

    • 1542 Words
    • 7 Pages

    This lack of investment would lead to a fall in the demand for Haitian Gourde, causing a depreciation in the case of a flexible exchange rate. But surprisingly empirical evidence shows an appreciation in the exchange rate in fact, since 2010 which may be due to the country overvaluing its currency in a managed float system. Where in the government attempts to keep the value of the currency between a minimum and maximum value decided for a period of…

    • 1542 Words
    • 7 Pages
    Improved Essays
  • Improved Essays

    John Hilsenrath Analysis

    • 403 Words
    • 2 Pages

    Author Jon Hilsenrath, uses this article to discuss the thoughts and ideas of the Bank of England’s Governor, Mervyn King, concerning the future currency rates from around the world, especially being used competitively by nations, in a global attempt to stimulate economic growth and stability. Hilsenrath, wrote this article in order to give an idea of what to expect concerning currency rates and the future of the global economy. Hilsenrath, begins this article by stating that the Bank of England’s Governor, Mervyn King, believed that 2013 would become a difficult economic year likes it’s preceding, and offered a prophesy that many nations would turn to lowering their currency exchange rates in order to act competitively with other nations…

    • 403 Words
    • 2 Pages
    Improved Essays
  • Decent Essays

    Dollar Surge

    • 610 Words
    • 3 Pages

    With this increase in the value of the dollar has come the predicament of low sales for goods and services produced in the United States as they try to compete with cheaper imports from its competitors who have gained from the rise in the dollar exchange value (Thoma). The US consumer can now acquire a similar product for less from outside than the one produce locally in the US. The most affected are exporters from the US such as Wal-Mart. With close to $485 billion of its revenue coming from outside the US, the rising dollar is cutting these benefits by allowing competitors from China where the Yuan has been devalued to have access…

    • 610 Words
    • 3 Pages
    Decent Essays
  • Improved Essays

    Australian Dollar Impact

    • 1307 Words
    • 6 Pages

    Over the previous three years, the reality has been demonstrated that the pound has fallen in light of Australian dollar. This thought or era is totally depended upon the information or fulfilled data gave by the Reserved Bank of Australia. According to (Investopedia; 2016), there are different outside powers that has been controlling the conduct of activity of Australian dollar or pound. The separation in the estimation of cash of pound and Australian dollar is because of the variety in the rate of enthusiasm of the banks of these two nations which is somewhat little yet makes more noteworthy impact. There are different variables in charge of diminishing the esteem which can be either interior to outside.…

    • 1307 Words
    • 6 Pages
    Improved Essays
  • Improved Essays

    Some countries devalue their currency on purpose for a certain reason. According to "3 Reasons Why Countries Devalue Their Currency.", “Countries may change the value of their dollar to boost exports,to shrink trade deficits, and to reduce debt. ”(15) Surrounding countries changing the value of their money can affect others, which includes the United States of America. Prices increase and decrease due to the change of the value in cash, making a change in society’s everyday life.…

    • 1146 Words
    • 5 Pages
    Improved Essays
  • Improved Essays

    This my assignment of essay Increasing worth of Canadian Dollar which is aiming to get stronger over US dollars since from 1990’s to the present scenario. Attachments As per I have studied and gone through the material that I took for the topic regarding the Increasing worth of Canadian Dollar which is aiming to get stronger over US dollars since from 1990.doc H Singh.doc Increasing worth of Canadian Dollar which is aiming to get stronger over US dollars since from 1990’s to the present scenario.…

    • 1178 Words
    • 5 Pages
    Improved Essays
  • Superior Essays

    The key measure of external stability is the current account deficit. Historically, Australia’s CAD has been increasing over the past decades being 1.1% of GDP in 1970s to 4.4% in the 2000s (RBA, 2015). Currently, CAD is 3.2% of GDP and is forecasted to be 4% next year. Australia’s persistent CAD has been an external stability issue for Australia and factors that contribute to high CAD include narrow export base, manufacturing competitiveness, and accumulated foreign debt. Australia has a narrow export base which means that Australia’s exports are heavily titled towards primary commodities.…

    • 1445 Words
    • 6 Pages
    Superior Essays
  • Improved Essays

    Mexican Peso Crisis Essay

    • 924 Words
    • 4 Pages

    IMF Project that created problems for the nation that they helped Carissa Nicholls University Of The People The project discussed is the IMF Mexico project in 1994. In 1994 The International Monetary Fund has approved an 18-month stand-by credit for Mexico about US$17.8 billion in support of the Government’s 1995-96 economic and financial program. “In the analysis of the causes of the Mexican peso crisis - and of its depth - consensus is emerging around a variety of factors. These include the large scale of the current account deficit, which had reached almost 8% of GDP in 1993 and 1994, as well as the fact that an important part of this deficit” (Stephany Griffith-Jones The United Nations University WIDER (World Institute for Development Economics Research) Causes and Lessons of the Mexican Peso Crisis.…

    • 924 Words
    • 4 Pages
    Improved Essays
  • Great Essays

    Bangladesh Bank Case Study

    • 8092 Words
    • 33 Pages

    With a view to making good of the economic imbalance and crisis situations, central bank takes necessary measures for stabilizing the price level. e) Employment opportunities: Bangladesh bank takes initiatives for creating employment opportunities by means of credit control mechanism. 7.3. Expansion and development functions: 1. Development of agriculture sector: Bangladesh bank formulates policy for expansion of agricultural-sector for the purpose of economic up-liftments in the country.…

    • 8092 Words
    • 33 Pages
    Great Essays
  • Improved Essays

    Global Reserve Problem

    • 828 Words
    • 4 Pages

    According to Stigliz the global financial system is not working well. It is especially not working well for the developing countries; money is flowing uphill from the poor to the rich. The richest country in the world, the United States cannot live within its means. They have been known to burrow 2 billion a day from poorer countries. Much of the money that is burrowed from the developing countries to the developed world is used to pay enormous debts.…

    • 828 Words
    • 4 Pages
    Improved Essays
  • Superior Essays

    Oil Research Paper

    • 1145 Words
    • 5 Pages

    Oil (or petroleum) is a very important thing to us. We use it every day. We use a lot of it in just a single day. Our life depends on oil. It may not be the only thing but it is one of the most important.…

    • 1145 Words
    • 5 Pages
    Superior Essays
  • Great Essays

    3. Rationale/Executive Summary 3.1 Background of my division The Mr Price Group Limited division that I have chosen is the apparel retail division, also known as the clothing division of Mr Price. My reason for choosing the apparel division of Mr Price instead of the Home or Sport division is because the apparel sector is a fast fashion retailer and has generated a strong brand with well-known corporate social responsibility programmes. The target market of the apparel division is young and vigorous customers, mostly females between the ages of 15 – 35, who are in the LSM income groups.…

    • 1788 Words
    • 8 Pages
    Great Essays