Devaluation of Taka ruled out: BB Governor asks RMG exporters to be careful about deals

Bangladesh Bank Governor Dr Salehuddin Ahmed yesterday ruled out the possibility of local currency (Taka) devaluation at this moment, demanded by exporters, but suggested to be careful about any deal with their buyers in view of the current global financial crisis.
"There is a recent tendency that importers place huge orders when they reach the verge of bankruptcy. So, the exporters, particularly in the RMG sector must remain alert," he said at a press conference at Bangladesh Bank.
The BB Governor recognized that the currencies in most of the countries other than China have depreciated, but said the Taka remained stable for quite a long time and that helped reduce the import cost.
Consumers in Bangladesh, are yet to benefit form the reduced import cost and inflation is still soaring over double digit through prices of essential commodities have declined sharply in the international market.
Dr Salehuddin is optimistic about pulling down inflation saying there are enough indications in the market that the inflation, already eased to some extent, would further come down significantly in the days ahead.
"The inflation will fall substantially by the year-end from around 10 per cent at present due to sharp fall of global prices and bumper boro harvest and a better outlook for aman this season, Deputy Governor Ziaul Hassan Siddiqui supplemented.
Replying to another question, the Governor said the regulatory bodies of banks, financial institutions, insurance companies and stock market should be more active and, at the same time, they would have to be cautious that over regulation does not affect market discipline.
He mentioned that Bangladesh Bank has strengthened its supervision of commercial banks and financial institutions and asked the banks and financial institutions to strengthen their internal control to consolidate their position.
"We'll have to remain alert so the recession does not affect us," he said.
Dr Salehuddin said the central bank has long been trying to encourage commercial banks to provide adequate credit to agriculture, SMEs and housing sectors of Bangladesh to help accelerate the country's economic growth.
He, however, said: "Our major challenge is to protect the real sector from the financial sector."
The press conference was to review the country's economic and financial sector situation in view of the global financial meltdown that pushed developed and developing countries into recession and made the countries like Bangladesh vulnerable.
Replying to a question, deputy governor Nazrul Huda said Bangladesh Bank has a target to reduce the interest rate spread from 6 percent to 5 percent through reduction of the lending rates. During the last three quarters, the spread declined to some extent, but still remained above the target.
He, however, expected that the spread would come down to the target level by December.
The Governor said the central bank was still pressing private banks to further reduce interest rates on bank loans to reduce their rate spread to below five points.
To maintain expected GDP growth targets and keep inflation tolerable, the central bank will not change its monetary policy against the backdrop of the world crisis, he said in answer to a query.
The bank has no plans at the moment to adjust the value of the taka against the US or any other currency, Salehuddin added.