Bangladesh Bank’s newly introduced currency strategy is expected to stabilise the taka in 2025, following a prolonged phase of depreciation that saw it underperform most Asian counterparts last year, analysts have suggested.
The central bank has adopted a daily recalibration approach for the exchange rate, a move edging the currency closer to a free-floating regime.
This builds upon the crawling peg system introduced in 2024, which permits fluctuations within a defined band.
The shift has already curtailed the taka’s six-month volatility, which had surged in the wake of last year’s economic turmoil, according to data compiled by Bloomberg.
Despite these measures, the taka remains down by approximately 2% this year, marking the steepest decline among Asian currencies.
This follows an 8% depreciation in 2024—its fourth consecutive year of weakening—exacerbated by domestic unrest that culminated in the ousting of Sheikh Hasina.
In a significant shift, Bangladesh Bank last month permitted dealers to engage in foreign currency transactions at freely negotiable rates within a band.
It also introduced a twice-daily reference exchange rate and is working towards an auction-based forex intervention model to regulate spot market volatility.
This move away from rigidly fixed exchange rates is part of a broader series of economic reforms undertaken after last year’s political upheaval.
The interim government secured an agreement in December to unlock $645 million in International Monetary Fund (IMF) funds.
Nonetheless, global economic headwinds, including ongoing trade conflicts, continue to pose risks for the taka.
Chief Adviser Yunus, under mounting pressure to hold elections swiftly, faces the formidable task of steering the economy towards recovery while managing substantial import liabilities.
