Once upon a time, we used to read, and children also read nowadays,
A for apple,
B for ball,
C for Cat,
D for the doll.
But nowadays, due to the era of science and technology, these thoughts have been changed. Now there is
A for aircraft,
B for billionaire,
C for controversy,
D for Dollar!!!
There are probably 196 countries in this world, and among those, the majority have their own currency. But what does the term mean?
Let me introduce you to “Dollar”.
What is a dollar?
Well, after hearing the term “dollar,” the first thing that comes to mind is the ” USD “. But the USD is not the only dollar. On this globe, many countries use the term “dollar” as their currency, such as the Australian Dollar, Canadian Dollar, Singapore Dollar, Hong Kong Dollar, etc. Except these people generally like to give significance to the American Dollar (USD) more and more. That is not their fault.
Most countries use the USD as an international currency. Still, there are a few more currencies that have the ability to be used as international import-export
Why is the USD the most used dollar?
So far, if we see research on the most powerful countries in the world, the first name we may find is “America” or The US”. because the US is one of the most well-developed and technologically furnished countries. As they have already gained a place as a powerful country on the globe, their currency is so far the most wisely used one.
Let’s go back to history. At The time of the Second World War the European countries stored their valuable Gold in the US according to the rate of
1 ounce = 35 dollars.
Most people think that was the main reason behind the introduction of the dollar throughout the world. The European countries then made a deal in such a way that whenever they might need any gold, they would provide the USD to the US. After that time, the reserves of the other countries get stored in dollars.
Why has the dollar crisis happened recently?
There are several reasons for the increase in the value of the US dollar, but the primary factor is demand for the dollar. As the demand for the dollar increases, so does its value. Conversely, if the demand decreases, the value also decreases. Demand for dollars increases when international parties, such as foreign nationals, foreign central banks, or foreign financial institutions, demand more dollars. Other factors that affect whether the dollar appreciates against other currencies include inflation rates, trade deficits, and political stability.
This time, the dollar crisis is a global phenomenon. This scenario is common at most banks in the country. Meanwhile, due to the dollar crisis, many banks in the country are unable to pay the LC liabilities on time. There is a delay in the payment of some liabilities. According to the data from Bangladesh Bank, Agrani Bank currently has the largest dollar deficit. The state-owned bank’s deficit has exceeded $256 million.
Apart from this, Exim Bank (88 million), Dhaka Bank (68 million), Shahjalal Islami Bank (64 million), UCBL (49 million), The City Bank (47 million), Pubali Bank (45 million), Prime Bank (42 million), and Southeast Bank are in a deficit of 41 million dollars. Eastern Bank’s deficit amounts to $35 million. Mercantile Bank 34, One Bank 32, Standard Bank 27, National Bank 24, Bank Asia 14, and Standard Chartered are in a deficit of 11 million dollars. Trust, BRAC, and NCC Bank have a deficit of eight million dollars. The foreign sector Commercial Bank of Ceylon also has a deficit of four million dollars.
Recent data show that foreign exchange reserves are depleting in various countries. Statistics show that China currently has the largest foreign exchange reserves in the world. In June 2022, the country’s reserves were 3.24 trillion dollars. However, China’s reserves have fallen significantly compared to last year’s.
In Bangladesh , the import cost has increased by about 35-36% in the years of 2021-22. And at the same time, the export income increased by 34 percent, but the expatriate income decreased by 15 to 17 percent. Basically, the country benefits the most when expatriate income increases. Because 70-75 percent of the export income is spent on importing raw materials. As a result, import costs could not be met with export and expatriate income.
Experts talk about various reasons behind the global dollar crisis, such as the import-export deficit, war between Russia and Ukraine, increase in military expenditure by the United States and allied countries, including Europe, decrease in remittance flow, imposition of economic and commercial blockades by the United States on various countries, including Russia, increase in oil prices, decrease in supply, etc.
Is there a solution?
Experts say this crisis could not have been completely avoided. However, the severity of the crisis could have been reduced if Bangladesh Bank had taken timely action. Actually, the prices of fuel oil, capital equipment, raw materials, and food products have increased on the world market. At the same time, shipping has increased. To stabilize the crisis all over the world, there are a few methods suggested by social experts. They are
- Implementing a floating exchange rate.
- Moving away from pegged rates,
- monitoring trading markets.
- Attractive government policies.
- Own currency purchasing
Currencies rise, and currencies fall. Isn’t it a zero-sum game, and for that matter, aren’t the stakes pretty small in any case?
In general, yes. The reason to be concerned about a sudden dollar decline, then, is that it so happens that the United States is currently a supply-constrained economy, while much of the rest of the world is demand-constrained. So the net effect is negative almost everywhere.
আরও ব্লগ পড়তে এখানে ক্লিক করুন (https://ysseglobal.org/blog/)
Writer
Intern
Lutfur Nahar
Content Writing Department
YSSE