Bangladesh Bank launches crawling peg, sets Tk 117 per USD as mid-point
Bangladesh Bank today introduced the crawling peg exchange rate system and allowed banks to buy and sell US dollars freely at around Tk 117.
"It has been decided to introduce a crawling peg exchange rate system for spot purchases and sales of US dollars," the BB said in a notice.
Under this system, a Crawling Peg Mid Rate (CPMR) has been set at Tk 117 per US dollar with an immediate effect.
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"Scheduled banks may purchase and sell US dollars freely around the CPMR with their customers and in interbank deals," the BB said.
The crawling peg, a system of exchange rate adjustments, falls between two extremes: the fixed rate and the floating or market-based rate. The key difference is that a crawling peg allows for limited fluctuations within a predefined range, while a fixed exchange rate has almost no flexibility.
Since mid-2022, the taka has been depreciating against the dollar, a trend primarily attributed to a balance of payments deficit leading to a significant reduction in reserves. The weakening of the taka has fuelled domestic inflation as the cost of imports has risen.
The BB move comes as an IMF mission team led by Chris Papageorgiou concluded its 15-day visit to Bangladesh today. During the visit, it discussed economic and financial policies in the context of the second review of the programme.
"We welcome Bangladesh Bank's bold actions to realign the exchange rate and simultaneously adopt a crawling peg regime with a band as a transitional step toward greater exchange rate flexibility to restore external resilience," said Papageorgiou in a statement.
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