Could Taka Remain Stable Next Year?

Grim credit and NPL situation Questions Taka's valuation.

Despite Standard & Poor's projection of a decline in oil prices next year, India's decision to impose restrictions on rice export cast shadow over the general inflation. The country supplies 40% rice to the global market and the decision has potential to hike rice prices. Govt has to concentrate more on procuring rice from other sources. Now which one outweighs the other is what we need to see. Since the govt is continuing the contractionary policy,we will see some impact on the inflation.

Meanwhile, IMF limits Bangladesh's foreign credit intake to $8.44 billion for 2026 as the country's risk rating is slided from low to moderate. Moody's already noted that unrecovered loan reached 24% of total loans from 11.1% in 2024. And the credit rating agency observed that central bank's latest loan rescheduling measure, 2% payment for classified loan, will only increase the tally of NPL ,further worsening the financial stability.

In this backdrop, opportunity of private sector credit from foreign source is shrinking and getting tougher. One positive impact is more and more banks are coming to stock market for raising funds. Eastern, Pubali,NCC and Jamuna announced to issue separate bonds in a bid to raise a total of Tk 26 billion from the market. I argued here several times to raise funds from the stock market, where undocumented money has easy flow and accountability is ensured. This step reduces pressure from public banks and central banks and helps a lot inflation-taming measures. Now it is time to see what response they will get from the market.Moreover, as debt service obligation is rising ,the central bank is creating a database to collect and store information about foreign credit taken by private sector.

The revenue generation will be a challenge for next year. As I highlighted in the piece "Need For More FTAs" if govt does not chalk out a plan on how to compensate the loss of tariff revenue stemming from reciprocal tariff then budget deficit will grow. Similarly, in "Altering Policy To Rejuvenate The Economy" I highlighted there is no clear roadmap on how to tackle the $34.71 billion NPL. The IMF foreign credit ceiling of $8.44 billion for 2026,part of which is already disbursed, and negative credit rating of the various agencies has already put severe constraint in getting private credit from abroad. There is also uncertainty about the kind of inflation we will have next year. The central bank is in OK mood to the merger of 6 troubled bank,costing govt Tk 200 billion. So contractionary policy will likely to prolong. In this backdrop, how much money lying outside banking system comes to bank through stock exchange and remittances may become a deciding factor. Though there size will be much smaller compared to the void created by the NPL. Clearly ,it puts huge pressure on the value of Taka against major currencies. Despite the current appreciation pressure, govt is intervening into forex market. Could taka remain stable next year? That is a crucial question whose will be searched by everyone in coming months.