The Bangladesh Bank is strongly considering introducing a crawling peg system for the Taka to address its fluctuations in its value against foreign currency within the first quarter of this year.
Sources shared this after a meeting between the top officials of Bangladesh Bank (BB), leaders of ABB and Bangladesh Foreign Exchange Dealers' Association (Bafeda) on Wednesday.
A crawling peg system is a method of exchange rate adjustments that allows a currency with a fixed exchange rate to fluctuate within a band of rates.
It is a hybrid of fixed and floating exchange rate systems.
In the monetary policy for the January-June period of 2024 declared last week, the central bank said it would introduce the crawling peg system as part of the plan to move towards a market-based exchange rate regime in future.
Currently, three countries -- Botswana, Honduras, and Nicaragua – use a crawling peg, according to the International Monetary Fund.
The central bank also said that the crawling peg system will be tethered to a carefully chosen basket of currencies within a defined band corridor.
A competitive and representative equilibrium rate will be established at the midpoint of the corridor, allowing the exchange rate flexibility within these bounds, it added.
At the meeting, discussion also took place regarding increasing inflow of the foreign currency, including remittance in the country, to improve availability of foreign exchange, sources added.