Dollar exchange rate/devaluation of domestic currencies and our poverty line.

in finance •  2 years ago  (edited)

The exchange rate is at an all-time high in my country. We are officially getting 108 takas for $1 and a little more on unofficial sites. Just a year ago the rate was 88 taka. Can you see the difference?
It may seem like it will only impact government imports on a major scale. But the truth is, this devaluation hits much deeper.

We are paying around 30% more for grocery and daily life products but also but our income is the same.

Poverty is the silent violence of mankind.

This current inflation and devaluation of local currencies remind me of the quote. Because this scenario is not happening exclusively in Bangladesh but all over the world. Inflation for the lower-income consumers was between 13-21% higher than for the higher-income consumers. Understanding this equation is important because the full consequences of large devaluations depend on this.

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image source

In simple words, this situation is making poor countries poorer. Or more precisely, the gap between the higher and lower class is increasing.

I was wondering if productivity is raising, people are making money so why we are going poor? From what I understand, it's solely because of the continuous undervaluation of domestic currencies. In other words, the overvaluation of dollars and our sole dependency on one currency. Using prevailing exchange rates has the effect of magnifying cross-country inequality by about 50 percent. This is alarming!

This decreasing poverty line will surely hit the situation of migration and refugees. So even if it doesn't impact negatively rich countries as much as us, it will create a global crisis.

My personal experience is, that the amount of financial stress we are dealing with tends to force us to do down our moral line too. We who live by the non-tradeable are facing it more because there's no other way to live without them. Devaluation causes a fall in real wages. I'm getting the same from the pandemic to till now but I'm buying more, paying almost 30%-45% more than before.

The unfortunate thing is, there's no way out. The government can't go low in terms of wages nor in terms of imports. That's why we witnessed the Sri Lanka case. I wish not to see the same happen in any other country.

We, low-income people/country can only try to save ourselves from falling from the edge!

Thanks for visiting my blog.

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Hi, @iamjohnn,

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