5 Taka – Bangladesh

In 1994, Bangladesh's currency situation was characterized by a managed floating exchange rate regime, a significant step away from the earlier fixed-rate system. The Taka (BDT) had undergone a major devaluation in the early 1990s as part of broader economic liberalization reforms, moving from a heavily controlled official rate to a more market-responsive one. By 1994, the exchange rate was determined through a daily interbank market, though the Bangladesh Bank (the central bank) remained an active participant to curb excessive volatility. This period saw relative stability in the nominal exchange rate against the US Dollar, but underlying pressures from trade deficits and inflation persisted.

The macroeconomic context was one of structural adjustment under guidance from the International Monetary Fund (IMF). A key focus was on maintaining a competitive real exchange rate to boost the crucial ready-made garment (RMG) exports, which were becoming the engine of economic growth. However, the currency management faced challenges from a widening current account deficit, fueled by imports of capital goods and consumer items, and moderate but persistent inflation (around 5-6%) which eroded the Taka's purchasing power domestically. Foreign exchange reserves were under pressure, necessitating careful management by the central bank to meet import bills and service external debt.

Overall, 1994 represented a period of consolidation for Bangladesh's currency framework. The Taka was not in crisis but operated within a delicate balance. The authorities were navigating the transition to a more open economy, using limited interventions to prevent sharp depreciation that could spike import costs and inflation, while also avoiding an overvalued currency that would hurt export competitiveness. This cautious management aimed to support the growing export sector, which was vital for long-term economic stability and the generation of much-needed foreign exchange.