By Waliur Rahman In Dhaka

The Bangladesh currency, the taka, is to be allowed from Saturday to float freely on the foreign exchange market.

The decision was taken at a meeting of senior officials of the Bangladesh central bank on Thursday afternoon.

The announcement ended weeks of speculation about when a flotation might take place, after the government agreed to a proposal to float made by the International Monetary Fund (IMF).

The government has been negotiating with the IMF for a multi-million dollar 'poverty reduction credit programme', but the the agency said it would only consider the request if the authorities floated the taka by June.

Benefiting exporters

Finance Minister Saifur Rahman told reporters earlier this month he had agreed to the float proposal.

He had earlier argued that flotation could not be allowed unless the country's foreign exchange reserve passed the $2bn mark.

Most countries have floated their currencies and so we cannot wait longer Ayubur Rahman Bhuiyan, economics professor Dhaka University

The level in reserve is still hovering around the $1.8bn mark, but Mr Rahman has said a freely floating taka would benefit exporters and Bangladeshis working abroad.

The taka has been pegged to the dollar, at a pre-announced value of between 57.4 and 58.4 per US dollar.

But authorised dealers in the foreign exchange market were allowed to set the exhange rates for their customers and interbank transactions.

Volatility

The central bank said the exchange rates would now be decided without reference to any pre-announced band.

But it said it would intervene if it observed volatility in the market.

Some economists have said allowing the taka to float might cause the currency to depreciate by as much as 20%.