Where will the rupees come from?
We do not have a large volume of Indian rupees in our foreign exchange reserves. If rupees are to be used, there can be trade in Indian rupees equivalent to USD 2 billion in exports. So transactions can begin in taka and rupees only to a certain limit. Even then, if the system starts, several questions come to the fore. Exchange rates and many other factors are involved in this decision.
My question is, where will such a large volume of rupees come from? Bangladesh does not have that much in investment in India. If we are to buy dollars and then convert those dollars into rupees, that is hardly of any use. What is the benefit of converting dollar into rupees and then importing in rupees? Yet the government is taking a decision to this end. Let's see what happens.
Another point is that the Bangladeshi taka is devalued at the moment, but this many not always remain so. India has no problem with its reserves. It has enough to meet expenses for 12 months' imports.
The International Monetary Fund (IMF) is itself doubtful if it will be actually possible for Bangladesh to ensure the amount of reserves it has called for by June, or even by September. We must keep in mind the risks involved in carrying out trade in rupees with an economy as large as India.
The matter of how far Bangladesh's businesspersons are placing importance on this matter or welcoming it, should also be taken into cognizance. They are the ones who will be doing business. It must be ensured from beforehand that the businesspersons do not face losses while dealing in rupees. It also must be seen how other countries are dealing, or have dealt, with India in this regard. Since the government has taken this decision, we can wait and see where this goes.
* Mustafizur Rahman is distinguished fellow, Centre for Policy Dialogue (CPD)