From Shortage to Surplus: Dollar glut challenges exporters as taka rises

Staff Reporter :

Just a year after grappling with an acute dollar shortage that strained foreign reserves and destabilised the exchange rate, Bangladesh now finds itself on the opposite end of the spectrum – facing a surplus of US dollars that presents a fresh set of economic challenges.

Since the introduction of a flexible exchange rate regime on 14 May, the Bangladesh Bank (BB) has intervened to prevent the taka from appreciating too rapidly.

In July alone, the central bank purchased $486 million from the market within just three days, as the interbank exchange rate fell sharply from Tk122.80 to Tk119.70 – a Tk3 drop in one week.

The BB says these purchases aim to support exporters and remittance earners, who risk seeing reduced returns from a stronger local currency.

This shift marks a stark reversal from FY24, when the central bank net-sold $9.42 billion to defend the taka. With a view to rebuilding foreign reserves, the BB is targeting $30 billion within the next year and $40 billion by FY27, up from the current $24.1 billion-equivalent to less than five months of import cover.

BB Governor Ahsan H Mansur reiterated the bank’s dual focus on strengthening reserves to cover at least six months of imports and bringing inflation down to 5 percent by March 2026. The present surplus is largely being driven by subdued private sector
demand, amid ongoing political uncertainty and sluggish investment.

According to BB data, net inflows from exports and remittances between July and May of FY25 exceeded import payments by over $8 billion, compared to just $1 billion during the same period the previous year. In May 2025 alone, inflows reached $7.1 billion, while import payments stood at $5.4 billion-resulting in a $1.7 billion monthly surplus.

Despite the excess of dollars, commercial banks are actively selling rather than holding on to foreign currency, citing a shortage of local currency liquidity. Many banks have previously locked up funds in government treasury bills and bonds, leaving them short of cash.

Under the market-driven exchange rate regime, banks now compete for the most attractive dollar-buying rates, often offloading dollars quickly to maintain taka reserves.

This situation has led to criticism from exporters and remitters, who argue that they are losing out. Banks bought dollars from them at Tk120, but later sold to the central bank at Tk121.50-netting a Tk1.50 per dollar margin.

Treasury officials have suggested that earlier BB intervention-when rates first fell below Tk120-could have helped avoid this disparity.

Meanwhile, key investment indicators remain weak. Imports of capital machinery declined by 25.56 percent year-on-year during July-April of FY25, following a 23.86 percent drop in FY24-underscoring a slowdown in industrial activity. Imports of industrial raw materials rose by 10.73 percent, but this growth was largely concentrated in the garment sector, with other industries facing pressure from elevated inflation and subdued domestic demand.

Despite a fall in interbank rates, the kerb market cash dollar rate remains high at around Tk125 – just Tk0.50 lower than the previous week-highlighting a continued gap between official and informal exchange rates.

Some banks are also charging elevated rates for credit card transactions, and forward booking of dollars has stalled due to the rapid appreciation of the taka.

While some, including Standard Chartered Bangladesh CEO Naser Ezaz Bijoy, see the current surplus as temporary – attributable to weak demand and improved monitoring of remittance inflows – others caution that without a revival in investment and a return to political stability, the surplus may obscure more deep-seated structural vulnerabilities in the economy.