Published: 12:01 AM, 09 October 2026
A Stronger Taka: Cheaper Imports, Weaker Exports!
The recent strengthening of the Bangladesh Taka against the US dollar has revived a familiar debate. If Taka appreciates, will imports become cheaper? Will exporters lose competitiveness? Will exports decline?
The conventional answer appears straightforward: a stronger Taka should make imports cheaper and exports less competitive, while a weaker Taka should do the opposite. But Bangladesh’s experience suggests that the relationship is much more complicated. The central issue is not whether Taka is strong or weak against the US dollar. The real question is whether Bangladesh’s goods and services are becoming more or less competitive relative to those of its trading partners.
This is why the bilateral USD/BDT exchange rate should not be treated as a complete measure of external competitiveness. What matters is how the taka moves against the currencies of major trading partners and how that movement interacts with relative inflation and prices. This brings us to two important concepts: the Nominal Effective Exchange Rate, or NEER, and the Real Effective Exchange Rate, or REER.
Bangladesh experienced a sharp depreciation of the Taka beginning in 2022, when the dollar moved beyond Tk100 after remaining around Tk85–86 for a long period. The textbook expectation was that a weaker Taka would make Bangladeshi exports cheaper internationally, encourage exports and discourage imports.
The actual outcome was more nuanced. Export growth did not simply follow the scale of currency depreciation. Global demand, energy prices, freight costs, imported input prices, wages, productivity and the pricing behaviour of international buyers all influenced export performance.
The ready-made garment sector provides a useful illustration. Suppose an exporter previously received US$100 for an order when the exchange rate was Tk85 to the dollar. The proceeds were worth Tk8,500. If the exchange rate moved to Tk120, the same US$100 would yield Tk12,000. At first glance, the exporter appears to have gained substantially.
But international buyers do not necessarily leave the entire currency gain with the exporter. If the buyer negotiates the dollar price down from US$100 to US$90, the exporter receives Tk10,800 at the new exchange rate. The depreciation has still provided a benefit, but less than the headline exchange-rate movement suggests.
At the same time, the exporter may be paying more taka for imported cotton, yarn, chemicals, machinery, fuel or accessories. Thus, the gain from a weaker currency is partly offset by higher production costs. The ultimate effect depends on imported-input dependence, local value addition, productivity, wages and the exporter’s bargaining position.
The same logic applies when Taka appreciates. An exporter receives fewer Taka for each dollar earned, but imported inputs and machinery may become cheaper in Taka terms. For an industry dependent on imported inputs, appreciation is therefore not simply a loss. Its net effect depends on both revenue and cost structures.
The same caution applies to imports. A stronger Taka can reduce Taka cost of a dollar-priced import if the international price remains unchanged. But the final domestic cost also depends on global commodity prices, freight, insurance, financing costs, tariffs, taxes and domestic distribution costs. Exchange-rate appreciation does not automatically translate into proportionate reductions in consumer prices.
More importantly, Bangladesh does not trade only with the United States. China, India, the European Union, Japan, the United Kingdom, Singapore and other economies are important trading partners. Looking only at the Taka-dollar rate therefore provides an incomplete picture.
This is where NEER becomes relevant. The Nominal Effective Exchange Rate measures Taka against a weighted basket of currencies of major trading partners. It provides a broader measure of the currency’s nominal movement than the bilateral USD/BDT rate.
For example, Taka may depreciate against dollar while moving differently against other major trading-partner currencies. Its overall movement on a trade-weighted basis may therefore be quite different from what the USD/BDT rate alone suggests.
REER goes a step further. It adjusts the effective exchange rate for differences in prices or inflation between Bangladesh and its trading partners. In simple terms, it considers not only how the taka has moved against other currencies, but also how the cost of producing goods and services in Bangladesh has changed relative to competing economies.
This distinction matters because nominal exchange-rate movement and real competitiveness do not always move together. A nominal appreciation does not necessarily mean an equivalent deterioration in competitiveness if domestic costs and prices are rising more slowly than those of trading partners. Conversely, even if the nominal exchange rate remains unchanged, faster domestic inflation can make Bangladeshi products relatively more expensive.
Therefore, the statement that “a stronger Taka hurts exports” is too simple. The more meaningful question is whether Bangladesh’s export prices and production costs, relative to those of competing countries, are becoming more or less favourable. REER provides a more useful framework for examining that relationship.
Bangladesh’s experience after the 2022 depreciation reinforces the point. Exchange-rate adjustment is important, but it is only one component of competitiveness. International buyers consider the total cost and value of a product: price, quality, delivery time, reliability, compliance, productivity and supply-chain capability. A currency movement cannot compensate indefinitely for weaknesses in these areas.
The exchange rate also serves as an adjustment mechanism for the wider economy. When external shocks occur, a flexible exchange rate can allow part of the adjustment to take place through the currency rather than through a sudden compression of imports, reserves or domestic economic activity. Flexibility, however, does not mean that every exchange-rate movement is desirable or that disorderly market conditions should be ignored. The objective is an exchange-rate framework that permits adjustment while maintaining orderly conditions and supporting macroeconomic stability.
Bangladesh’s exchange-rate regime has evolved accordingly. The country moved from a relatively controlled foreign-exchange environment toward current-account convertibility in 1994, from a fixed exchange-rate regime to managed floating in 2003, and subsequently toward greater flexibility, including a crawling-peg arrangement in 2024 and wider exchange-rate flexibility thereafter. This evolution reflects the increasing integration and complexity of the external sector.
The broader lesson is that exchange-rate policy should not be reduced to a search for a permanently “strong” or “weak” Taka. An economy exposed to international trade needs a currency capable of responding to changing external conditions. The relevant question is whether the adjustment is orderly and whether it supports sustainable external competitiveness.
There is a useful analogy in nature. A strong tree may stand firmly in ordinary weather, but when a severe cyclone arrives, rigidity can become a weakness. Grass bends with the wind and may appear less strong, yet its flexibility allows it to survive the storm and stand again. Economic resilience can work in much the same way. A currency that cannot adjust may transfer the burden of an external shock elsewhere in the economy. A currency that can adjust appropriately can absorb part of that shock.
For Bangladesh, therefore, the debate over a stronger or weaker Taka should move beyond the daily USD/BDT rate. Policymakers, exporters, importers and analysts need to consider the NEER, REER, relative inflation, production costs, competitor currencies, imported-input dependence and international pricing behaviour.
The exchange rate is neither simply a tax on exporters nor a subsidy for importers. It is a relative price connecting the domestic economy with the rest of the world. Its effects differ across sectors, firms and time.
The objective should therefore not be a particular exchange-rate number, but a framework that allows the economy to adjust to changing domestic and external conditions without unnecessary disruption. A resilient economy does not try to prevent every movement in its currency. It allows the currency to move, adjust and absorb part of the shock, so that the broader economy can bend without breaking.
Not a strong taka. Not a weak Taka. A responsive Taka—one that allows the economy to adjust.
Mehdi Rahman writes on
foreign trade and
monetary policies.
