Businesses fear investment crunch
Unabated depreciation in the value of the Taka vis-a-vis the greenback has alarmed the business. But the central bank governor is optimistic that the forex market volatility would ease soon.
The Bangladesh Textile Mills Association (BTMA) has expressed its concern over the sudden increase in dollar prices. The association is worried that the investment in textile sector might miss the target this year.
However, Bangladesh Bank Governor, Salehuddin Ahmed said the bank is watching the developments carefully. He advised the manufacturers to increase their productivity and efficiency to cope with the changing situation.
He advised the investors to be cautious about the foreign exchange market, which, he believed, would settle down soon. Ahmed also hinted that the BB might go for some measures to discourage import of some non-essential consumer products.
"We are closely monitoring the situation. Banks are settling (international) L/C payments, that is why there is some pressure on the forex market," the governor said.
Centre for Policy Dialogue, an independent think tank, believes if prolonged, such a situation might create a sort of "imported inflation" in the country, though exporters might gain in the short term.
"This is an open market. The BB is not likely to intervene in the (foreign exchange) market," said Dr. Mustafizur Rahman, a senior researcher of the CPD.
Rahman said long-term volatility in the foreign exchange market is not desirable as it affects investors' investment decision.
BTMA chairman Abdul Awal said the backward linkage of Bangladesh's fast growing textile and clothing industry witnessed 106 per cent growth during last four years, but the growth is likely to slow down because of such unbridled increase in the prices of dollar.
"Until 2005, the country's investment in primary textile stood at Tk 180 billion and we initially expected Tk 40 billion fresh investment this year," said Awal. He advised the government to cut imports of non-essential consumer items, such as candy and processed foods and drinks, to ease pressure on the greenback.
He also advised the government to increase letter of credit (LC) margin of some products and discourage their imports.
"I would advise the government to control the abrupt increase in dollar price to help sustain our investment," said Fazlul Haque, president of Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA).
Citing some examples he said, many knit-textile investors had made investment plans at reduced rate of dollar. Since dollar is getting expensive, it would be very difficult for them to implement their investment plan.