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Weak taka makes imports costlier, lives miserable

Sajjadur Rahman
For nearly one year, the taka has been losing ground against the dollar. The exchange rate, which for sixyears had hovered betweenTk 68 and Tk 70, came crashing down since the second half of 2011 and reached Tk 85 yesterday.
Analysts said, despite the temporary reprieves to exporters and remitters, an import-dependent nation like Bangladesh has a number of challenges to cope with any time its currency sheds value.
Real sector operators and consumers, who spoke with The Daily Star, said the devaluation could worsen their plight amid a soaring
inflationary pressure.
Not only luxury goods and fruits, Bangladesh imports a lot of essentials — from edible oil to sugar, onion, baby food and baby care products, spices and office stationery — to meet its demand. The prices of these goods have directly been impacted by the 16-17 percent devaluation of the local currency against the greenback and the extra cost has been passed on to the consumers.
Though apparel manufacturers benefit from the devaluation, they are paying more for import of raw materials, such as cotton, yarn and chemicals. Even the government is counting more — nearly Tk 1,500 crore more for every $1 billion
worth of oil imports.
“The taka depreciated by 10 percent only in December (last month). This depreciation has impacted our business and the cost has been passed on to the consumers," said Nestle Bangladesh, a major player in baby milk and formula, in a statement explaining the reason for a sharp rise in its products' prices in recent months.
A400-gram Lactogen 2 (a baby milk brand), which was sold at Tk 400 several months ago, is being sold nowatTk 500 by pasting an additional price sticker on the box A couple of months back the price of this brand was hiked toTk445a tin (box) fromTk400. Similarly, the prices of all other brands of Nestle Ban -gladesh, such as Cerelac and Nan, were also increased by nearly 20 percent in the past one quarter.
"I cannot bear the costs rising every two months. A tin of milk goes only two days,” said Shafiqul Islam, an executive in a private company.
The prices of office stationery, mostly imported, also soared by nearly 20 percent in the past two months. "The prices of all the items have gone up. Every time we've to explain to the customers,” said Nezam Uddin, proprietor of Rifat Business Centre, a wholesaler at Karwan Bazar in the city.
Also, the exchange rate devaluation is raising the cost of production in manufacturing concerns.
"The exchange rate has adversely affected our business,” said A Matin Chowdhury, managing director of a group of textile industries. “A sharp depreciation of the local currency means higher operating and production costs,” he added.
Chowdhury produces yarn for weavers and knitters, but he has to import cotton, which is affected by the taka devaluation.
Zaid Bakht, an economist, said managing the exchange rate is the biggest challenge after inflation. It may also push poverty up, he said.
“Export is growing, but not enough to reduce the gap between demand and supply,” said Bakht, a research director of Bangladesh Institute of Development Studies.
Expedition to the works of foreign aided projects and a cut in non-productive expenditure can give a respite, he added.
sajjad@thedailystar.net