Bangladesh’s trade competitiveness has improved following a reasonable depreciation of the taka against the US dollar in February, easing concerns over its previous overvaluation.

According to Bangladesh Bank data, the local currency’s real exchange rate should have been Tk 124.27 last month, while its nominal value stood at Tk 122—indicating a slight overvaluation of Tk 2.27. In January, the overvaluation was Tk 3.67, further highlighting the currency’s gradual adjustment.

The central bank’s Real Effective Exchange Rate (REER) index, which measures currency valuation against a trade-weighted basket, fell to 101.86 in February from 103.01 in January. A REER of 100 is considered balanced, meaning any value above this suggests an overvalued currency that hampers export competitiveness.

Bangladesh’s inflation rate declined to 9.32% in February, down by 0.62 percentage points from January, helping to reduce the REER. However, the central bank acknowledges that inflation remains higher than in major trade partners such as China, India, and the Eurozone, affecting export competitiveness.

Despite these challenges, Bangladesh’s exports grew by 10.53% during the first eight months of the fiscal year. Experts suggest this growth could have been even stronger with a fully competitive exchange rate.