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Published : 13 Jul 2025, 10:50 AM
The exchange rate of the US dollar, Bangladesh’s main foreign currency, has dropped by up to Tk 1 within a week -- a decline bankers and traders attribute to several factors.
According to data from Bangladesh Bank, on Jul 10, banks sold dollars at Tk 121.85. Eight days earlier, on Jul 2, the rate stood at Tk 122.85. Since then, the dollar rate has been falling gradually and slipped below Tk 122 on Jul 10.
Despite the May 14 announcement to let the dollar float to meet IMF loan conditions, the exchange rate did not rise. Instead, it declined after a month and a half.
Following fears of a spike under the more relaxed rules, the rate plateaued for a while before gradually declining over the past week and a half. Bankers say a steady inflow of remittances and export earnings has helped stabilise the supply of dollars. At the same time, reduced imports of capital machinery have lessened dollar demand.
The head of treasury at a private bank told bdnews24.com that the remittance rate was Tk 121 on Jul 10, down from Tk 122.30-122.40 a week ago.
Central bank officials said the foreign exchange market has remained stable in recent months, thanks to increased remittances and export receipts. In June, Bangladesh Bank also received large inflows from the IMF, ADB, JICA, and AIIB, further boosting reserves.
Arif Hossain Khan, executive director and spokesperson of Bangladesh Bank, pointed to these reasons behind the drop in dollar value.
DOLLAR DIP DRAWS OPTIMISM
NRB Bank Managing Director Tarek Reaz Khan highlighted the positive impact of increased supply, saying the lower dollar rate will reduce import costs, which may help curb inflation.
“There was a lot of anxiety around the dollar for some time. Banks were struggling to open LCs,” he said.
“Now the supply is good, and LCs are no longer an issue.”
In fiscal year 2024-25, remittances hit a record $30.32 billion. Since the fall of the Awami League government last year, Bangladesh has been receiving over $2 billion per month in remittances, even exceeding $3 billion at one point.
Zahid Hussain, former World Bank lead economist for Dhaka, echoed similar reasons for the dollar’s decline.
According to him, improved remittance and export flows, along with loan disbursements from development partners, helped improve both the banks’ Net Open Position (NOP) and Bangladesh Bank’s forex reserves, contributing to the lower exchange rate.
In late June, Bangladesh received $1.35 billion from the IMF, $0.9 billion from the ADB, $0.35 billion from JICA, and $0.4 billion from AIIB.
“Lower import costs are good for the overall economy. Exporters and remittance senders may get slightly lower rates, but the change won’t be drastic," said Zahid.
Mutual Trust Bank Managing Director Syed Mahbubur Rahman noted that strong remittance flows during the two Eids, combined with a sharp drop in capital machinery imports, led to the price correction.
Officials from several bank treasury departments also pointed to the decline in capital machinery imports.
One treasury head said, “Sluggish private investment is evident in the declining credit growth. Since the change in government, private sector credit growth has been falling.”
Citing this backdrop, he added: “New investment and business activity have slowed, which is the main reason behind the dollar’s depreciation. With fewer new ventures, imports of capital machinery have dropped.”
Private sector bank loan growth has remained below 8 percent for the past seven months. In May, it was 7.17 percent, down from 7.5 percent in April.
CAUSE FOR CAUTION
However, another bank official cautioned that a continued fall in the dollar rate is not entirely good for the economy. It could hurt remittance inflows and exporters, thereby reducing foreign earnings.
A senior Bangladesh Bank official noted that many factories owned by conglomerates like Beximco and S Alam have shut down. These industrial groups play a major role in the country’s economy. Since August, many of their factories have remained closed, stopping imports of capital equipment.
Kazi Abdus Sobhan, managing director of Madaripur Garments Ltd, said that the high interest rate, around 15-16 percent, has made borrowing expensive, deterring business expansion or new ventures. As a result, the dollar market has lost the momentum it once had.
