In the currency race to the bottom, one nation is pushing in the opposite direction: Bangladesh.
“I have the pleasant challenge of appreciation,” central bank Governor Atiur Rahman said in an interview in London Thursday. The 61-year-old economist overseeing monetary policy in one of the world’s poorest nations said Bangladesh is alone in the region with pressure for a stronger exchange rate.
Bangladesh Bank has bought $3.5 billion from banks in the currency market over the past year to prevent the taka from strengthening. That’s helped boost foreign-exchange reserves to a record $27 billion.
Bangladesh isn’t getting swept by the tide of depreciation because of the strength of its garment export industry, where it is the global leader after China. The devalued yuan and Indian rupee help Bangladeshi apparel makers by reducing their cost of buying raw materials such as buttons.
“If their currencies go down, Bangladesh gains,” Rahman said. About 80 percent of the value of garment exports derives from imported materials, he said.
Rather than allowing the currency to strengthen to 70 taka to the dollar -- a level that Rahman says the market would push for without his intervention -- the central bank has kept the rate around the current 77.8 throughout this year. It was unchanged for a second day at 77.7750 at 2:40 p.m. in Dhaka.
“Stability is our No. 1 goal,” said Rahman.
The aim is to keep its official exchange rate within 2 taka of the so-called kerb rate used by street traders, he said.
Even with China’s economic slowdown and the ensuing financial market turmoil, Bangladesh’s exports rose 28 percent in August. The industry produces garments for about a third of the price of China’s, according to the central bank.
“Our garments didn’t go down during the deepest days of the financial crisis,” he said.
Under Rahman, Bangladesh’s central bank has taken on a bigger role than just monetary and exchange-rate management. An expert in poverty alleviation, Rahman has pushed banks to open rural branches, gave discounted loans to garment exporters and fostered environmentally-friendly development.
Bangladesh is poised to make its sovereign bond debut in New York. A planned debut sale of $1 billion of bonds in the U.S. currency -- taking place, according to Rahman, “anytime soon” -- will be converted back into taka and used to finance infrastructure projects. Part of the sale may conform with Islamic financial rules, as a sukuk. The maturity and interest rate have yet to be decided, he said.
The government will also sell bonds in British pounds maturing in five years with a rate of 6.5% annually, Rahman said.