Foreign exchange reserves are declining while the price of the dollar continues to climb. Pressure from import payments and rising demand for foreign currency has created fresh instability in Bangladesh’s dollar market.
Bangladesh Bank is selling dollars from its reserves to manage the situation, but the upward trend in the exchange rate has not stopped.
After settling the Asian Clearing Union (ACU) import bill of $1.64 billion for the September–October period, the country’s gross foreign exchange reserves stood at $34.85 billion at the end of Thursday (5 November). Under the International Monetary Fund’s (IMF) BPM6 methodology, reserves fell to $29.99 billion.
On Wednesday (4 November), the day before the ACU payment, gross reserves were $36.38 billion and BPM6 reserves were $31.52 billion. The large outflow to clear the ACU liability caused a sharp one-day drop in reserves.
At the same time, the dollar has become more expensive. On Thursday, the interbank market traded at Tk 124.35 per dollar. The rate for settling import liabilities reached Tk 124.80. In the open (kerb) market on Wednesday, dollars sold for as high as Tk 129 — roughly Tk 4.20 more per dollar than in the banking channel.
Bankers say the pressure stems from higher import costs for fuel oil and liquefied natural gas (LNG), payments on government import bills, and demand that exceeds inflows from exports and remittances.
Reserve Sales Fail to Ease Pressure
To increase dollar supply in the foreign exchange market, Bangladesh Bank has resumed selling dollars from its reserves. On Wednesday, the central bank sold another $100 million to commercial banks through auction. Last week it sold $122 million.
These measures have had limited impact because supply remains well below demand. According to bankers, commercial banks sought around $800 million last week, while Bangladesh Bank supplied only $122 million.
An auction called on Tuesday (3 November) for an additional $100 million was eventually cancelled. Bankers believe the central bank did not sell because the bids submitted by banks were higher than expected.
After the fall of the Awami League government in August 2024, Bangladesh Bank stopped selling dollars from reserves for an extended period. Combined with a rise in remittances through formal channels, this helped reserves recover. Gross reserves crossed $37 billion for the first time on 29 June this year and reached $37.41 billion on 1 September. They have been declining since then.
Higher Import Costs Drive Dollar Demand
Bangladesh Bank data show the trade deficit widened to $7.47 billion in the first quarter (July–September) of the current 2026-27 fiscal year, up from $5.71 billion in the same period of the previous year.
Import payments (FOB, including EPZs) rose 15.1 percent to $19.33 billion. Export earnings increased 7 percent to $11.85 billion.
Dr. Md. Ezazul Islam, Executive Director of Bangladesh Bank and Director General of the Bangladesh Institute of Bank Management (BIBM), said import costs were about $12 billion in July–August but rose to nearly $19 billion in September — an increase of roughly $6 billion in a single month.
He noted that export earnings have not kept pace with the rise in imports, widening the gap. High international prices of fuel, other commodities, and raw materials have also pushed up the import bill.
Fuel imports are a major source of pressure. In the first two months of the current fiscal year, fuel imports cost $2.5 billion, double the $1.25 billion spent in the same period last year. Foreign-currency payment obligations of Bangladesh Petroleum Corporation (BPC) and Petrobangla have added further demand.
In September, letters of credit (LCs) opened exceeded $8 billion, while LCs settled topped $6.5 billion.
No Relief from Remittances or Exports
Remittances and export earnings are the two main sources of foreign currency, yet inflows remain insufficient relative to import demand.
Remittances totaled $2.77 billion in September and rose to $2.87 billion in October. This is slower than the previous stretch from December to May, when inflows exceeded $3 billion for six consecutive months.
Syed Mahbubur Rahman, Managing Director of Mutual Trust Bank, said remittance inflows have declined compared with earlier levels and export earnings have also fallen short of expectations. Additional pressure from settling government LCs is compounding the problem. With weaker remittance inflows and higher external payment obligations, the dollar is becoming more expensive.
The current account also slipped into deficit. In July–September it recorded a deficit of $1.3 billion, compared with $821 million in the same period of the previous fiscal year.
Open-Market Rate Hits Tk 129
The dollar has risen in the open market as well. On Wednesday it sold for up to Tk 129, against an interbank average of Tk 124.35.
Bankers say demand for cash dollars for medical treatment, education, and travel abroad is also influencing the kerb rate. With demand exceeding supply, a gap has opened between the open-market and banking-channel rates.
The Money Changers Association of Bangladesh has instructed members not to sell dollars above Tk 128.10 and has warned of fines and legal action for violations. Despite this, reports indicate sales at Tk 129 in the open market.
Further Pressure Expected
Economists warn that if the imbalance between dollar demand and supply persists, pressure on reserves and the exchange rate is likely to continue. In particular, if fuel import costs remain high and remittance and export earnings do not rise as hoped, the dollar could strengthen further.
A higher dollar rate raises the cost of imported fuel, edible oil, wheat, sugar, pulses, and industrial raw materials. When importers pass on these higher costs, consumers ultimately bear the burden. Rising production costs can also hurt industrial activity.
Analysts say long-term market stability cannot be achieved simply by selling dollars from reserves. Effective steps are needed to boost remittances through formal banking channels, ensure export proceeds are repatriated, control unnecessary imports, and manage fuel import costs. Increasing foreign direct investment and financing from development partners is also essential.
At present, dollars are being sold from reserves to meet demand while import liabilities continue to pressure the same reserves. Restoring balance between foreign-currency inflows and outflows remains the central challenge.