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Plant risks to get shut down over dues, |
Dollar crisis in the country has become acute. Recently, news report surfaced on the press divulged that the Chinese govt refused to sell coal to Payra Thermal Power Plant. The plant authority has not yet cleared the due payment of $293 million for earlier shipments1. The current stock will run out in two weeks. Earlier Rampal Thermal Power Plant ran similar problems stemming from government’s strict regulation on dollar purchase. Later government intervention resumed its operations.
Adani group also placed a bill of $20 million before the Power Development Board for the electricity it generated in Jharkhand power plant.
Meanwhile, another news report says Biman Bangladesh Airlines,national flag carrier of Bangladesh,has yet to pay Taka 20 billion($186.91 million) to Bangladesh Petroleum Corporation(BPC) for the jet fuel it supplied2.
Perhaps the worrying thing is the decline in export and remittance receipts. And $3 billion worth of export proceeds have not yet reached the local banks during the July-February period of current fiscal year3.
This will indeed cause great pressure to dollar demand. In this backdrop, central bank has little option but to devalue the currency further. Value of Taka has long been artificially pegged at some rate that is not reflective of the market. In my observation two things hold back the ruling regime to let market determine the value of Taka: first, it fears market rate will increase the cost of development expenditure; second, deterioration of inflation that will raise the cost of sending money abroad.
An economist and former staff of IMF Ahsan H. Mansur argued that artificially pegged Taka presented a swollen estimate of GDP. Any adjustment will shrink that estimate. In an election year, govt is pretty much reluctant to do this as the stance will be politically costly.
Toxic political climate fuelled by anarchistic behavior also played a role in this crisis. It increases incidence of money laundering and capital flight.
In 2009,when AL assumed power , 1 US dollar fetched Tk 68.80. In 2014, Taka depreciated further to 77.72. In 2019,exchange rate became Taka 83.85/US dollar4. And now 1$ fetches Taka 107 officially and Taka 112 unofficially. Though such depreciation increased our competitiveness and our export earnings manifolds, illicit capital flight has also increased many times. And our budget deficit also gets widened. The fast decline in reserve(now $29 billion) also puts pressure on the exchange rate.
There are initiatives to trade in Yuan and Rupee. However the transaction will be in small amount and bigger impact of such transaction will take time.
There is no alternative to break the political stalemate and reach a reconciliation in a bid to send a positive signal to the market and investors that will ultimately restore the confidence and restrain the money flight. Look at Sri Lanka.Since there is no stalemate, Indian and Chinese investors flock there to invest. To improve drastically things at home when recession like scenario looms large in the West, there is no alternative to reconciliation and stability.
Notes And References
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