Taka set to weaken amid rising energy costs
Bangladesh Bank has begun permitting a controlled and gradual depreciation of the taka against the US dollar in an effort to ease pressure arising from rising global energy costs, with analysts suggesting that the currency may weaken further in the coming weeks.
Since 8 March, the exchange rate has started to soften, with the US dollar approaching Tk123 after remaining stable at around Tk122.30 for several months.
The move comes amid growing concerns over higher import bills, particularly for fuel and energy, following volatility in global oil markets linked to the ongoing Middle East crisis.
According to central bank data, the Real Effective Exchange Rate (REER), calculated using the currencies of 17 major trading partners and adjusted for inflation and exchange rates, stood at Tk126 on 29 March.
This indicates that the taka could depreciate by around Tk3.24 to maintain export competitiveness and align with market fundamentals.
In addition, the daily exchange rate band maintained by Bangladesh Bank sets an upper limit of Tk130 and a lower limit of Tk125, suggesting that the currency could weaken by up to 5.6 per cent before reaching the upper threshold.
The exchange rate band, introduced in December 2024 under an IMF-supported framework to ensure greater flexibility in the currency market, is used internally by the central bank to monitor exchange rate movements and is not publicly disclosed.
Under IMF guidelines, Bangladesh Bank is expected to purchase US dollars when the exchange rate falls below the lower band and sell dollars when it exceeds the upper band in order to maintain market stability.
However, amid the recent global oil price shock, the central bank has suspended dollar purchases through auctions since March while allowing a gradual depreciation of the taka to reflect market pressures.
Officials said Bangladesh Bank is also likely to refrain from selling dollars from its foreign exchange reserves unless the exchange rate crosses the upper band, indicating a cautious approach to reserve management.
Economists believe this measured depreciation strategy is aimed at balancing multiple pressures, including rising fuel import costs, export competitiveness and foreign exchange reserve stability.
They note that a gradual weakening of the taka could help absorb external shocks, particularly higher energy import bills, while avoiding sudden volatility in the currency market.
The move is expected to support export earnings and remittance inflows while ensuring that the country’s energy import payments remain manageable during the ongoing global fuel uncertainty.
