Foreign banks easing credit lines, fuel suppliers lowering risk premiums

Foreign banks begin easing line-of-credit backup to local banks and fuel suppliers lowering risk premiums as spinoffs from a steady rise in remittance into Bangladesh, sources say, as April receipt sets a record.

The country received US$2.75 billion worth of remittances in the just- passed month of April, billed second-largest monthly receipt by the country after March 2025, according to official statistics.

With the latest count, the $450-billion economy has received $24.54 billion in the first 10 months so far this fiscal (FY'25), also the second yearly largest volume after FY'21 when the amount was $24.78 billion.

Such rising remittance inflow starts delivering benefits to heal the country's macroeconomic ills, giving a much-needed respite to the economy that has passed through multipronged strains in recent times.

Hailing such upturn in remittance inflow, officials and monetary analysts say it is not only helping stabilise foreign-exchange market by way of bolstering the country's forex reserves but also enhancing the liquidity inflow in the money market.

A significant spinoff from the steady foreign-exchange inflow, according to them, is foreign corresponding banks start easing line-of-credit backup to Bangladeshi banks while global energy suppliers begin relaxing risk premium.

According to the latest statistics of Bangladesh Bank (BB), the country's central bank, Bangladeshi citizens working abroad sent in $2.75 billion in April that marks an annualised remittance growth of around 35 per cent as the nation received $2.04 billion in April 2024.

With the latest count, the $450-billion economy has received $24.54 billion in the first 10 months so far this fiscal (FY'25), also the second yearly largest volume after FY'21 when the amount was $24.78 billion.

Seeking anonymity, a BB official says the country managed to clear all the external overdue bills largely due to the record inflow of remittances --and the upturn helps overcome many macroeconomic stresses the economy passes through in rent times.

Alongside bolstering the forex reserves through stabilising the exchange rate, the official says the central bank now focuses buying the American greenback from the market, which will enhance liquidity flow into the banking system.

"Simultaneously," the central banker says, "the rising supply of foreign currencies prompted the global correspondent banks to start easing the limit to line of credits for the country's domestic banks, which is a good sign for the economy."

Talking to The Financial Express, director (finance) of Bangladesh Oil, Gas and Mineral Corporation or Petrobangla AKM Mizanur Rahman said they managed to clear all external debts amounting to $3.74 billion two months before the cutoff time till June 2025.

Because of the payoff of the overdue bills, he said, the LNG suppliers have begun charging lesser premium on the spot market. "The suppliers have now been offering premium which is $11.50 lesser and it will certainly help reduce LNG-import costs."

Chairman of Policy Exchange Bangladesh Dr M Masrur Reaz says the rising trend in remittance helps strengthen forex-reserve buildups through stabilising foreign-exchange price and BoP or balance of payments.

"Riding on the growing supply of forex," he says, "the country has been able to check the reserve bleeding and it now gives a sign of rebound."

The economist notes that the upturn will ease the process for full normalisation of import that will be essential for inflation-combat management.

Apart from that, growing remittance inflow will certainly increase domestic consumptions through boosting sectors like construction and FMCG (Fast-Moving Consumer Goods), which will particularly help rural economy vibrate.

According to the BB data, the country's gross reserves now stand at $27.35 billion and at $22.0 billion in accordance with BB and IMF's BPM6 calculations.

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