The continued delay in making Taka as headline currency for airfares and logistics services is making the country looser.
Announced in April 2023, the move by the government was intended to stabilize fluctuating airfares and reduce the costs of foreign currency exchange, particularly for outbound passengers traveling to the Middle East. However, repeated deferrals in its implementation are causing financial losses to both consumers and the country's freight forwarding industry.
The continued delays are not only increasing costs for passengers but also allowing foreign airlines and logistics companies to benefit at the expense of local businesses.
The Ministry of Civil Aviation and Tourism issued a gazette in April 2023, mandating that both local and foreign airlines operating in Bangladesh charge fares in Bangladeshi Taka (BDT) starting from July 1, 2023. The decision was aimed at addressing the rising cost of airfares due to the devaluation of the Taka against the US Dollar.
With the value of the Taka falling, many Bangladeshis-especially low-income workers migrating to the Middle East-faced exorbitant airfare prices. The shift to Taka pricing was seen as a necessary step to stabilize costs and protect consumers from unpredictable fluctuations in exchange rates.
However, the implementation has faced repeated setbacks due to "procedural delays," as cited by government officials. The latest deferral, which pushes the execution date to January 2025, has raised concerns across the logistics sector.
Airlines and freight forwarders argue that continued uncertainty surrounding the currency change is leading to higher operational costs and complicating their financial planning.
The delay has also exacerbated the issue for Bangladeshi consumers, who continue to pay inflated ticket prices, as airlines still calculate fares in dollars, which are then converted at unfavorable exchange rates.The delay in implementing Taka as the headline currency has resulted in significant financial losses.
According to the Bangladesh Freight Forwarders Association (BAFFA), the rate of exchange (RoE) used by Biman Bangladesh Airlines for converting US Dollars to Taka has been set higher than the market rate. On October 1, Biman announced a RoE of 119.98 USD=BDT, while forwarders were receiving Taka 119.00 from banks. This discrepancy led to a loss of approximately Taka 1.5 billion in just one month, affecting the bottom line of freight companies and passengers alike. The higher exchange rate charged to customers has forced them to pay more per dollar, further inflating the cost of air travel and logistics services.
The extended delay has also benefited foreign airlines, who are able to continue charging in dollars without being impacted by the exchange rate fluctuations that domestic airlines face. This delay gives foreign competitors an unfair advantage, as local airlines like Biman are burdened with the additional cost of converting currencies, while foreign carriers face no such hindrance.
There are growing concerns that, once again, the implementation deadline will be postponed. Logistics service providers, travel agencies, and even passengers fear that the government may once again push back the timeline, potentially delaying the benefits of the Taka as the headline currency for airfares and reducing the pressure on airfares.
Nurul Amin, Vice President of BAFFA, pointed out, such delays would continue to harm local businesses and the economy. He noted that this continued deferral might be strategically used by certain parties, such as Biman Bangladesh Airlines, to take advantage of the favorable exchange rate on specific high-demand tickets like Hajj travel.
The government must act decisively to implement the Taka as the headline currency on January 16, 2025, as planned, to prevent further financial losses to the country's economy.
This policy has the potential to create much-needed stability in the airfares market and protect consumers from unpredictable price hikes. The repeated deferral undermines the credibility of the government's commitment to currency stabilization and market fairness. It is essential that the government delivers on its promises to ensure that local businesses and consumers are not left bearing the costs of the delayed transition.
As one senior official from the Ministry of Civil Aviation and Tourism explained, the intent behind this policy was always to provide more stability in the airfare market by lowering the impact of exchange rate fluctuations. However, the delay in execution has led to unintended consequences.
To avoid further financial strain, the government must ensure that the policy is fully implemented by January 2025, as promised, without any further deferment.
