Growing pressure of government's LC opening for imports to feed an expansionary economy prompts the central bank to hold its foreign-exchange-market intervention to keep taka-dollar pricing rates stable.
The Bangladesh Bank (BB) started the market intervention on July 13 last year in the wake of a persistent fall in the exchange rate on the interbank spot market under the prevailing free-floating exchange regime.
As the pressure of opening government LCs on the commercial banks continues to rise in recent weeks--when the inflow of remittance shows a bit of declining trend--the banking regulator now thinks buying the US dollar from this tight market could create further pressure on the market.
"That's why the central bank is not considering dollar purchasing from the banks right at the moment," says a BB official, on condition of anonymity.Geographic
Citing BB data, the official says the regulator lastly purchased dollars from the commercial banks to stabilise the exchange rate under the free-float exchange-rate regime more than a month ago.
On June 04, 2026, the BB bought $25 million from the participating banks through auction, taking the entire tally of BB-procured greenback to $6.42 billion since July last year.
As the demand for the American currency keeps rising amid growing LCs pressure of the government, the central banker says, the exchange rate on the market has been on the upturn for the last few weeks.
"If we resumes buying dollar, it could disturb the market as the commercial banks need to deal government LCs amounting to over $600 million each week, which is not tiny matter in the current forex- market context," the BB official told The Financial Express.
According to BB sources, the government opened LCs worth over $2.0 billion in June last and is set to open same volume of LCs this July as well.
Managing director and chief executive officer of Mutual Trust Bank (MTB) Syed Mahbubur Rahman says they have opened government LCs on a large scale in recent weeks, which requires enough stock of dollar to settle.
If the BB continues buying the US currency from the market, he says, it would be difficult for the commercial banks to cope with the LCs pressure. "So, it's a good regulatory policy because there are a small number of banks which can afford the LCs pressure."
Director-General of Bangladesh Institute of Bank Management (BIBM) Dr Md Ezazul Islam notes that the main objective of the regulatory forex intervention is to stabilise the exchange rate.
Under the expansionary fiscal policy, the economist says, the government's import-related activities will be increasing, which will put pressure on the forex coffers.
"If the BB continues buying dollar, it would definitely destabilise the exchange rate, which is against the spirit of the intervention."
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