Was too much foreign exchange a problem for Bangladesh? But it is now! Policymakers should be more innovative while they try to tackle this.
When the currency is floating, it can be a problem to have more foreign currency. The local currency gets a boast, i.e. our taka will appreciate against dollar. You may think its a good thing. But no! While it may give us a good feeling that value of taka is increasing, but it will create a lot of unwanted consequences. There are many - to mention few, here are three most important: flow of forex will face a negative pressure (i.e. dollar inflow will decrease), import gets cheaper but export gets costlier. We don't want any of these to happen.
So, what to do?
The traditional answer for our policymakers would be to sell some of the dollars. Its may sound funny, but yes, the Bangladesh Bank tries to reduce its burden of dollar!
But there should be more innovative ways to handle this.
Basic idea that BB should dislodge some dollar - that will have to be done. But that does not mean that it has to be direct sale to the banks.
How about this approach - can you do this?
Say, government decides to set a side 5 billion dollar to create a number of funds - mutual type funds - that will be securitized. Those funds will be given to different hard and soft infrastructure type authorities (Jamuna Bridge, Padma Bridge, RHD, LGRD ministry, Private Submarine Cable authority, PKSF, A fund to support the growth of private universities, a housing project for middle class, a fund to finance the student loans, one mutual fund for every city corporation and many such projects). Each of these funds can be range from 100 million to 1 billion.
When the government is facing an unwanted inward forex pressure, those money could be pushed to these funds.
Once they are set up, there should be a policy to offload these securities in the capital market over a number of years. Say for example, government can sell 5% of these funds every year (at the minimum) or more based on the capacity of the market to consume the securities.
If the government considers something similar to this, that would be a big leap for Bangladesh.
I think our hardworking wage-earners in foreign land would also immensely be happy to see their hard work paying back not only their families, but also their country.
If you thought some of the ideas are worth of your reading time, please forward it to others. If you have an ear to the columinsts in regular traditional media, please forward it to them. If you have an ear to the journalists and news editors of the electronic media, discuss it with them. Hope they would look at the suggestions and give due diligence.
Thanks for your time,
Innovation Line
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Note: This is a freelance column, published mainly in different internet based forums. This column is open for contribution by the members of new generation, sometimes referred to as Gen 71. If you identify yourself as someone from that age-group and want to contribute to this column, please feel free to contact. Thanks to the group moderator for publishing the article.
Dear readers, also, if you thought the article was important enough so it should come under attention of the head of the government please forward the message to them. Email address for the Chief Advisor: feeedback@pmo.gov.bd or at http://www.cao.gov.bd/feedback
You can also send it to Bangladesh Bank at this email: gm2combb@bangla.net
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