Staff Correspondent:

The persistent dollar crisis in Bangladesh, prevailing for the last three years, is finally showing signs of relief. The instability of the global market caused by the Russia-Ukraine war hit every sector of the national economy, from energy to food. This inflated import costs. Along with this, the dollar crisis and abrupt currency devaluation led to unbearable inflationary pressure.

Now, the volatility in the dollar market has eased considerably, and financial indicators are faring well. However, the impact of high inflation still burdens everyday life.

Economists do not consider the current state of the dollar market to be fully normal. They note that the overall economy—including investment, trade, and commerce—remains sluggish.

As a result, import demand, particularly for industrial raw materials, has declined, easing pressure on the dollar. While this has brought some relief to the market, economists stress that it should not be mistaken for a return to normalcy.

Former chief economist of Bangladesh Bank, Mustafa K. Mujeri told the decision taken regarding the dollar market is good for the country. But we must remain cautious so that the exchange rate does not increase too much due to allowing the market solely to determine the dollar price. The economy is sluggish now, with lower import demand, and dollar demand as well. But it is too early to claim that the market has stabilised.”

He further said, “If we can strengthen our foreign exchange reserves, we’ll achieve a more comfortable economic position. However, high inflation and weak investment remain major issues for the economy. Without investment, employment is not growing, which could lead to more severe challenges in the future. Therefore, we must take stronger initiatives to expand export markets and increase remittance income.”

IS THE DOLLAR CRISIS EASING?

Following the fall of the Awami League government in August last year, measures to curb money laundering have played a central role in easing the dollar crisis. Increased monitoring has boosted remittance and export earnings, bringing positive changes to the financial balance.

From July to April, remittances rose by 28.34 per cent, and export earnings grew by 9.83 per cent. Besides this, older import liabilities have been settled, which has reduced pressure on reserves.

In this context, the bankers believe it is unlikely that there would be instabilities in the future even if the exchange rate remains market-based.

They also noted that maintaining stable foreign exchange reserves without relying on foreign loans is a significant achievement.

The dollar exchange rate remained around Tk 123 for the past nine months. The prices have remained steady despite introducing the market-based exchange rate this month. Already, USD 3 billion in import liabilities have been paid from the foreign exchange reserve.

Bangladesh expects to receive USD 3.5 billion in foreign loans, including the next tranche from the International Monetary Fund (IMF), by June that would help bolster the reserves further.

HOW MUCH HAS INCOME INCREASED?

Remittances and exports, followed by services, foreign investment, loans, and capital market flows are the major sources of foreign currencies.

According to Bangladesh Bank, the country received USD 22.08 billion in remittance between July and March of the ongoing 2024–25 fiscal year, up from USD 17.37 billion in the same period of the previous year. This means, the income increases by USD 4.71 billion or 27.1 per cent.

Apart from this, export earnings during the same period was USD 33.87 billion, which is 9.5 per cent higher than the previous year.

The gap between dollar income and expenditure is also narrowing, which is leading to gradual improvement in Bangladesh’s balance of payments. As of March, the current account deficit dropped to USD 660 million, from $4.39 billion in March last year.

Despite a small deficit in the current account, there is a surplus in the financial account. By the end of March this fiscal year, the financial account surplus reached USD 1.31 billion, compared to USD 900 million in the same period last year.

Overall, the balance of payments has improved, with the total deficit dropping to USD 1.07 billion from USD 4.76 billion a year ago.

DOLLAR AND RESERVE SITUATION

Despite long-standing issues in the dollar market, few effective measures were taken in the past. After the interim government took office, the dollar was allowed to be traded at up to Tk 123, a rate that other banks soon followed.

Since the change in government, money laundering has declined due to tighter restrictions and increased vigilance. At the same time, the overall economic slowdown has contributed to reduced pressure on the dollar.

Meanwhile, instead of selling dollars from reserves, Bangladesh Bank has been purchasing from the market. This approach has helped the central bank maintain reserve stability, even while meeting large import payment obligations.

Currently, the foreign exchange reserves stand at USD 25.44 billion, according to Bangladesh Bank. The amount, however, stands at USD 20 billion, if calculated using the IMF’s BPM6 method, this amounts to just over USD 20 billion. When the Awami League was ousted last August, the reserve was USD 25.58 billion, or over USD 20 billion under BPM6.

Import restrictions have eased along with the stabilisation of the dollar market. Importers are once again able to access dollars from banks. Imports grew by 6.38 per cent, whereas growth had exceeded 15 per cent between July and March last year.

Mutual Trust Bank managing director Syed Mahbubur Rahman the dollar market in Bangladesh is now quite stable. Allowing market-based exchange rates was a timely decision, especially with reduced import pressure.”

“We expect the dollar market will remain stable. Remittance and export earnings are on the rise, but inflation, lack of investment, and job creation remain major economic challenges,” he added.