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At
present, the central bank follows a semi-flexible
exchange rate policy, revaluing the currency on the
basis of the real effective exchange rate, taking
account of the nominal exchange rates and inflation
rates of major trading partners. A level of reserves
equal to 2.6 months of imports and a black market rate
close to the official rate suggest the central bank has
fixed the exchange rate close to the equilibrium level
in the short term. Foreign reserves have stabilized at
around $1.7 billion through 1997 and 1998. While this
level is considered normal for Bangladesh, its foreign
exchange position is vulnerable as flood-related food
and
capital equipment imports increase in the coming months.
The World Bank and IMF emergency balance of payments
funds will provide relief, but further devaluation of
the taka is expected,
possibly as part of an IMF-sponsored ESAF program. While
the taka remains under pressure, its market value is
bolstered by annual aid receipts and by remittances from
overseas workers. The taka is nearly fully convertible
on the current account. The official exchange rate on
November 9, 1998 was Taka 48.7 to $1.
Foreign
firms are able to repatriate profits, dividends, royalty
payments and technical fees without difficulty, provided
the appropriate documentation is presented to the
Bangladesh Bank, the country's central bank. Outbound
foreign investment by Bangladeshi nationals requires
government approval and must be in support of export
activities. Bangladeshi travellers are limited by law to
taking no more than $3,000 out of the country per year.
Dollars are bought and sold in the black market, fueled
by the informal economy. U.S. exports do not appear to
have been negatively affected by the taka devaluations
in 1998.
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General Section
