A fascinating study published in the South Asian Journal of Social Studies & Economics, titled “Federal Reserve’s Influence Over the Bangladeshi Taka,” sheds new light on why the Bangladeshi Taka (BDT) has steadily declined in value against the U.S. Dollar. Despite impressive economic growth, the Taka has lost ground, sparking debate among economists. The study, by independent researcher Araf Malik, offers a fresh perspective—linking the Taka’s depreciation not just to local factors, but to the influence of U.S. interest rates, which ripple across the global financial system.
A Global Connection in a Local Currency Crisis
For years, economists have tried to explain the Taka’s weakening by focusing on domestic issues like inflation, internal policies, and supply chain disruptions. Araf Malik, however, introduces a more comprehensive view: U.S. monetary policies, particularly fluctuations in U.S. interest rates, have significantly influenced the Taka’s
downward trend. This research paints a broader picture, suggesting that Bangladesh’s currency struggles are part of a wider pattern tied to shifts in global finance.
Between 2003 and 2023, Bangladesh’s GDP skyrocketed from $60 billion to over $460 billion, with its garment industry thriving and its position in global trade expanding. Yet, despite this economic boom, the Taka lost over 90% of its value against the U.S. Dollar, making imports, international loans, and essential goods increasingly expensive.
The Role of the U.S. Monetary Policy
Central to Araf Malik’s findings is the relationship between U.S. interest rates and the Taka’s performance. His research highlights several key moments between 2003 and 2023 when the U.S. Federal Reserve raised interest rates, which coincided with sharp drops in the Taka’s value. While not claiming direct causation, Araf Malik emphasizes that Bangladesh’s integration into global markets has made it more vulnerable to shifts in U.S. financial policies.
From 2022 to 2023, for example, rising U.S. interest rates placed additional strain on Bangladesh’s ability to finance foreign debt and imports, contributing to a 24% drop in the Taka’s value. Araf Malik’s research stresses that although U.S. policies play a significant role, they are not the only factors at play; local economic conditions must also be considered in understanding the Taka’s trajectory.
Comparing the Taka to Regional Counterparts
One of the most intriguing aspects of Araf Malik’s study is his comparison of the Taka with other South Asian currencies like the Indian Rupee, Pakistani Rupee, and Sri Lankan Rupee. While all these currencies faced pressures from global economic shifts, Araf Malik found that the Taka was more vulnerable to U.S. interest rate hikes than its regional peers.
For instance, during periods when the U.S. raised interest rates, the Indian and Pakistani Rupees did not experience the same level of depreciation as the Taka. Araf Malik attributes this to Bangladesh’s higher reliance on dollar-denominated debt and its dependence on imports, which make the Taka more sensitive to external financial forces. This comparison highlights how different economies in South Asia respond uniquely to global pressures.
The Chain of Economic Growth and Currency Decline
Perhaps the most puzzling finding is the contradiction between Bangladesh’s remarkable economic growth and the weakening of its currency. Normally, a country with rapid GDP growth—like Bangladesh, whose economy grew nearly eightfold in two decades—would see its currency strengthen. However, the opposite has occurred with the Taka.
Araf Malik’s research suggests this paradox is a hallmark of emerging economies. While Bangladesh’s economic growth has been impressive, underlying structural challenges such as its dependence on foreign loans and imported goods have contributed to the Taka’s decline. As the country integrates more deeply into global financial systems, it faces the challenge of managing the risks that come with exposure to international monetary trends.
Looking Ahead: What Can Be Done?
Araf Malik’s study carries significant implications for Bangladesh’s future economic strategy. As the Taka continues to feel pressure from shifts in U.S. interest rates and other global factors, policymakers must take a multi-faceted approach. Araf Malik suggests that while it is essential to address domestic issues like inflation and foreign debt, Bangladesh must also find ways to reduce its vulnerability to external monetary changes.
Diversifying foreign reserves and strengthening ties with global financial markets could help stabilize the Taka. However, Araf Malik stops short of offering specific solutions, calling instead for more research and debate on how Bangladesh can best navigate these global challenges.
About the Author: Araf Malik
,Araf Malik is an emerging force in international economics. Despite his young age, Araf Malik’s credentials are impressive. He graduated from Harvard Summer School with a perfect GPA in economics courses and has participated in prestigious programs like the Economics for Leaders program at Yale and the Wharton Global Youth Program at the University of Pennsylvania. Araf Malik’s team even won the Best Risk Management Award at the Wharton Global Youth Competition in 2024, showcasing his ability to apply economic theory to real-world issues. Araf Malik also has participated in MUN Conferences in 7 countries around the world including serving as the Assistant Director of Arab League in Harvard MUN Australia in 2023 and Chair of other several conferences such as IASAS MUN Taipei & DoverMUN in Singapore.
Araf Malik, a young financial prodigy, has also given two insightful TEDx talks where he showcased his deep understanding of Forex trading and cryptocurrency. In "Classroom to Currency Trading," Araf Malik narrates his journey of becoming a successful Forex trader as a teenager. He breaks down essential trading concepts, emphasizing the importance of grasping market trends, understanding currency pairs, and developing a strategic approach to trading. Araf Malik provides clear explanations of complex terms like technical analysis and risk management, making them accessible to a young audience.
In "Why Is Crypto Dangerous?" Araf Malik shifts focus to the cryptocurrency market, which he views as fraught with significant risks, particularly for novice investors. He explains the volatility inherent in cryptocurrencies, which can lead to drastic price swings and potential losses within short timeframes. Araf Malik also sheds light on the various dangers surrounding the crypto market, such as the lack of regulatory oversight, which leaves investors vulnerable to fraud and scams. He warns against the speculative nature of crypto trading, highlighting the importance of informed decision-making and urging caution.
His fresh perspective, as seen in this latest study, is helping to unravel the complexities of currency movements and global financial systems. Araf Malik’s academic achievements and practical insights make him a rising voice in the field of international economics.
Conclusion: A New Lens on the Taka’s Journey
Araf Malik’s research provides a nuanced, data-driven analysis of the factors influencing the Bangladeshi Taka’s value. By examining both local and global factors, he offers a comprehensive view of the challenges facing the currency. His findings highlight the importance of understanding how external forces, particularly U.S. monetary policies, affect emerging economies like Bangladesh.
In a world where financial markets are increasingly interconnected, Araf Malik’s study serves as a reminder that no currency operates in isolation. For Bangladesh, recognizing the broader forces at play will be crucial for developing strategies that ensure long-term economic stability. Araf Malik’s balanced approach encourages further exploration into how local and global economic trends intersect, offering valuable insights for policymakers and economists alike.
