Bangladesh rules out currency float

Bangladesh will not float its currency in the near future, despite pressure from multilateral lenders.

Finance and planning minister M Saifur Rahman said he had almost been convinced by the lenders but had ultimately rejected their demands for the good of the country.

"The country is not yet ready to absorb this system as we lack the market responding culture," he said at a seminar entitled Full Float of Taka: Is Bangladesh Ready for It.

Leading Bangladeshi economists supported his stance including former central bank governor Dr Farashuddin.

"As the finance minister I should consider whether a system would bring good or bad for the economy of the country," Mr Rahman said.

Not ready

Mr Rahman said there were a number of considerations which had influenced his decision.

"The macro-economic environment, the infrastructural weakness of our financial sector and the foreign exchange reserve of the country does not satisfy the conditions to introduce the floating system."

Bangladesh's currency already trades in a tight range controlled by the central bank.

A sharp depreciation of the currency would occur after a full float, raising import and export costs, Mr Rahman said.

The government has slowly been depreciating the taka and on Wednesday adjusted the rate downwards to 58.40 to the US dollar from 57.50, effective from 6 January.

But an eventual float was not ruled out altogether.

"If the overall socio-economic conditions are favourable, we may go for it," he said.