For exporters desperately trying to keep up the latest robust run of merchandise sales abroad and cement the recovery from the coronavirus pandemic, an old problem has raised its head: a rising taka against a falling US dollar.

The situation has prompted the experts to call on the central bank and the government to take initiatives to shield exporters from the appreciating trend of the local currency.

Although the export volume has increased in recent months defying the uncertainty stemming from the ongoing economic slowdown, exporters are still facing hurdles due to the relatively higher exchange rate of the taka against its peers.

As part of its efforts to halt the appreciation of the taka, the central bank has started purchasing the dollar from banks soon after the recession hit the country.

Between July 1 and October 4, the Bangladesh Bank bought the dollar worth $2.62 billion, up 200 per cent from the last fiscal year.

Still, the interbank exchange rate fell slightly to Tk 84.80 per US dollar in contrast to Tk 84.95 on March 25, a day before the country declared the countrywide lockdown to contain the coronavirus pandemic.

The central bank, however, has managed a bit of success in stemming the massive appreciation of the local currency by intervening in the foreign exchange market.

The inter-bank exchange rate has been hovering between at Tk 84.80 and Tk 84.90 since July.

Had the central bank not intervened in the foreign exchange market, the local currency would have risen to a great extent. But this is not good enough given the exchange rate in other countries.

For instance, the Indian rupee was at 73.26 per dollar on October 5, up from 71.37 on January 1, according to data from the Reserve Bank of India.

"The Bangladesh Bank will face a challenge to depreciate the local currency in the next couple of months given the ongoing global economic situation," said Syed Mahbubur Rahman, managing director of Mutual Trust Bank.

Export earnings have been on the rise in recent months, but the country will have to maintain the trend in the days ahead to keep the wheels of the economy moving, he said.

In the first three months of the ongoing fiscal year, export earnings returned to the black as apparel shipments grew 2.58 per cent year-on-year to $9.89 billion.

Also, the government has received a good amount of fund in the form of soft loans and grants from various multilateral lenders to tackle the economic slowdown amid a fall in revenue collection and rising expenditure. 

These have given a boost to the foreign exchange reserve: it stood at $39.48 billion on October 4 in contrast to $33.09 billion on May 5.

"Although the financial indicators are magnificent, these have indicated the weakness of the economy in the wake of a sudden drastic fall in domestic consumption," said Ahsan H Mansur, executive director of the Policy Research Institute of Bangladesh.

The US dollar faced a 6 per cent drop on a trade-weighted basis since April due to the ogoing recession, according to a report of the Financial Times on September 28.

It is widely expected that the dollar may depreciate as much as 15 to 20 per cent against a basket of its peers in the next five years.

The dollar index is used to measure the value of the greenback against a basket of six world currencies - Euro, Swiss Franc, Japanese Yen, Canadian dollar, British pound, and Swedish Krona.

"The BB could offer a cash incentive to all exporters for the time being as halting the depreciation of the dollar is not possible for the time being," said Rahman.

"Our exporters are getting lower earnings than what the businesses of the competitive nations are enjoying due to their lower exchange rate against the dollar," he said.

Exporters have been facing the same problem even before the coronavirus pandemic struck Bangladesh.

Emranul Huq, managing director of Dhaka Bank, said banks are enjoying adequate foreign exchange liquidity due to a continuous increase in remittance and export.

Between July and September, remittance earnings hit $6.71 billion, up 48.52 per cent year-on-year.

But buyers will feel discouraged to purchase the country's goods if the taka continues to maintain a higher exchange rate.

The central bank may cut the interest rate on its Export Development Fund further so that exporters can borrow at a lower cost, Huq said.

"This will help trade off the loss for exporters emanating from the overvalued local currency," he added.

The central bank has injected reserve money to the tune of Tk 60,000 crore into the market against the ballooning foreign currency reserve, said Mansur.

Reserve money is also called as high-powered money, base money and central bank money.

All these names suggested that the reserve money represents the base level for money supply or it is the high-powered component of the money supply.

The initiative of the central bank, which now supplies money regularly, has helped the banking sector during the ongoing recession as it made more funds available for the lenders.

The foreign exchange reserve may shoot to $45 billion in the next six months as it will take more time for the imports to pick up amid declining domestic consumption, Mansur said.

But such injection of the reserve money should be stopped when domestic consumption rebounds.

If required, the central bank even should mop up the excess money from the banking sector after a certain period to contain a probable inflationary pressure.

"There will be no scope for an inflationary pressure for at least the next six months given the ongoing situations," said Mansur, also a former senior official of the International Monetary Fund.