The United Arab Emirates is one of Bangladesh’s main overseas labor markets. For the past week, various exchange houses in the UAE have been buying dollars from Bangladeshi workers at a maximum rate of BDT 119 per dollar. These dollars, collected from migrant workers, are then being sold to Bangladeshi banks at BDT 121 per dollar. And on Tuesday (September 2), the Bangladesh Bank purchased dollars from local banks at BDT 121.75 per dollar.
Officials involved in foreign currency transactions at local banks said that under the pretext of low demand, foreign exchange houses are paying migrant workers less per dollar while selling the same dollars to Bangladeshi banks at a higher price. This is largely because the Bangladesh Bank has taken a policy stance to prevent the dollar from depreciating. Had the central bank not intervened, the dollar rate could have fallen to BDT 115 this week, they said, creating an opportunity to correct the record depreciation of the Taka over the past three and a half years.
However, Arief Hossain Khan, spokesperson for Bangladesh Bank, said the central bank is buying dollars to prevent the rate from falling too sharply. Speaking to Bonik Barta, he said, “At the moment, the supply of dollars in the market is higher than demand. That is why we are buying dollars to keep the market stable. This is also strengthening the country’s foreign currency reserves.”
When asked whether the exchange rate should have been allowed to adjust further, the central bank spokesperson said, “If reserves were higher, maybe it could have been allowed. But if the dollar rate falls now, remittances and the export sector could be hurt. The hundi market might expand. The central bank will make decisions after reviewing the overall state of the economy.”
Bangladesh Bank has been buying dollars since July 13, citing the need to stabilize the exchange rate. On September 2 alone, it purchased $47.5 million from eight banks. Altogether, in the first two months (July-August) of FY 2025–26, it has bought $948 million. This comes despite the central bank announcing on May 14 this year that it would fully let the market determine the dollar exchange rate as part of commitments under its loan agreement with the International Monetary Fund (IMF).
The dollar market in Bangladesh had been volatile for nearly four years. According to data from Bangladesh Bank, in January 2022, the exchange rate stood at BDT 85 per dollar. After that, dollar market volatility intensified. A year later, on January 1, 2023, the exchange rate rose to BDT 103 per dollar. By January 1, 2024, the rate climbed further to BDT 110.
In June 2024, Bangladesh Bank introduced the crawling peg policy for determining exchange rates. At that point, the rate jumped to BDT 118 per dollar. On January 1, 2025, it increased again to BDT 120. By May 14, when the central bank announced full market-based exchange rates, the rate in the banking sector had reached BDT 122 per dollar. It rose to BDT 123 before beginning to fall. In July, the dollar rate in the banking sector dropped to BDT 120. Bangladesh Bank then started buying dollars to stabilize the market. Previously, the opposite had happened. Citing the need for market stability, the central bank began selling dollars from reserves in mid-2022. Over three years through FY 2024–25, nearly $26 billion was sold from reserves.
Economists and business leaders said the Bangladeshi Taka depreciated nearly 45 percent against the dollar over the past three fiscal years, fueling inflation in the country. Prices of all import-dependent goods rose sharply, in some cases doubling. They noted that allowing the exchange rate to adjust downward would reduce import costs, which would help bring inflation under control.
Mohammad Mustafa Haidar, Director of TK Group, one of the country’s leading consumer goods importers, told Bonik Barta, “If the Taka strengthens, people in Bangladesh, as an import-dependent country, will benefit. Prices of imported goods, including essentials, will fall. The government’s efforts to control inflation will also succeed. But it must be ensured that dollar supply does not shrink. The sources of dollar inflows in the market must not be hurt.”
Since 2020, capital flight from the country increased abnormally. As a result, the dollar shortage began in mid-2022. This crisis, which lasted for nearly three and a half years, started to ease in August 2024. As the Sheikh Hasina-led government fell amid a student-led mass uprising, avenues for capital flight narrowed. At the same time, overseas Bangladeshis sent record remittances home. In FY 2024–25 alone, $30.33 billion in remittances flowed into the country, $6.42 billion more than the previous fiscal year. Despite various challenges, the country’s export sector grew by 7.72 percent in the last fiscal year, generating $43.95 billion in exports, while import costs were $64.34 billion.
Relying on growth in remittances and export earnings, the dollar shortage eased. At the beginning of the ongoing FY 2025-26, as supply has exceeded demand, the exchange rate was pushed downwards. Officials from the treasury departments of at least four banks told Bonik Barta that with capital flight declining, demand for dollars in the hundi markets of Bangladesh’s primary overseas labor markets is no longer high. As a result, exchange houses are now compelled to sell dollars to banks. Several bank officials noted that if the Bangladesh Bank had not intervened and allowed the market to adjust, the rate could fall to around BDT 110 per dollar within a month. Due to central bank policies, foreign exchange houses are buying dollars at lower rates abroad and selling them at higher rates in Bangladesh, hurting both the economy and overseas workers.
However, Syed Mahbubur Rahman, Managing Director of Mutual Trust Bank (MTB), said, “This is not the time to speculate; maintaining market stability is more important. It is better to continue the central bank’s current policy of buying dollars to stabilize the market.”
He added, “Demand for dollars in the hundi market has not completely disappeared. We are still seeing transactions in the country’s curb market above BDT 124 per dollar. If there is a need to allow further market adjustment in the interest of the economy, it should happen through proper discussion.”