Bangladesh is entering a more flexible exchange rate era, and all signs suggest the taka will remain stable under a well-managed free-float system. This greater flexibility follows recent steps by Bangladesh Bank to allow market forces to determine the currency value, a move designed to foster economic resilience without triggering extreme volatility. In late May, the central bank formally adopted a more market-driven exchange rate regime. During the first week under this system, the taka traded within a narrow range of Tk 122–123 per US dollar, showing a “smooth start” with no significant disruptions. This stable market behavior suggests that the currency was already close to its true equilibrium value and that the initial shift was well-timed and well-executed. However, officials remain cautious. Central Bank Governor Dr. Ahsan H. Mansur emphasized that while banks now enjoy greater freedom to trade dollars, the central bank has set up safeguards such as monitoring large transactions and warning against hoarding to prevent speculative spikes. A key pillar of the new regime is transparency. Banks have been mandated to report significant foreign exchange trades daily, and a benchmark reference rate is now published publicly twice a day. These steps are intended to build trust and discourage manipulation. Despite this positive outlook, Bangladesh continues to operate with limited forex reserves around $25 billion which could pose risks during external shocks. Experts say that gradually building reserves, promoting remittance flows, and encouraging export earnings are crucial to anchoring the currency’s value under a free float. Economists view this shift as a sign of maturity in economic management. By fleeing rigid peg systems and adopting a managed float, the taka is now free to respond to trade dynamics and remittance inflows while central checks prevent instability. This approach aligns with IMF reforms and offers Bangladesh a stable yet adaptive currency framework. Builders of economic policy also caution that sustained stability will depend on a coordinated mix of fiscal, monetary, and trade policies. Over time, as reserves grow and financial markets deepen, the central bank may relax interventions allowing the currency to truly reflect market conditions. In summary, the early weeks of Bangladesh’s market-driven exchange rate system have shown encouraging stability and smooth operations. With continued transparency, reserve growth, and careful monitoring, the taka appears well-positioned to navigate the new regime without suffering harmful swings.
