BB imposes informal cap on dollar rates amid rising pressure

Bankers warn informal rate guidance affects interbank market efficiency.

The Bangladesh Bank has verbally instructed commercial banks not to buy dollars from the interbank market and remittance channels at rates exceeding Tk123.82 as rising demand for import payments puts pressure on the foreign exchange market.

Senior officials of several banks confirmed the matter to The Business Standard. While the interbank dollar rate is around Tk123.82, banks are unable to purchase remittance dollars below Tk123.90-Tk123.95, according to bankers.

Rate guidance raises market concerns

Several bankers said many banks were reluctant to trade at the capped interbank rate of Tk123.82. They argued that fixing the exchange rate prevents the interbank market from becoming fully functional and that allowing market-based price discovery, even if the rate rises above Tk124, would make the market more effective.

A senior Bangladesh Bank official told The Business Standard that the central bank is trying to keep the dollar rate at a lower level.

However, the International Monetary Fund and other development partners have repeatedly recommended that Bangladesh maintain a market-based exchange rate regime.

The dollar rate has been rising since late June. Many commercial banks settled letters of credit (LCs) at Tk123.95 on Monday.

The IMF mission visited Dhaka this month to begin preliminary discussions on a new lending programme.

Economists said Bangladesh would need to comply with IMF conditions to secure a new programme. Under the previous $4.7 billion IMF programme, one of the key conditions was making the exchange rate market-based and limiting central bank intervention.

Bangladesh is now moving towards a new lending arrangement with the IMF after completing the previous programme. Economists believe the new programme may include conditions requiring limited central bank intervention by the central bank in determining the exchange rate.

Former Bangladesh Bank governor Ahsan H Mansur told TBS that the central bank should move away from the practice of intervening in the foreign exchange market to keep the dollar rate artificially low.

“The dollar rate should be market-based. Even if it crosses Tk124, it should be allowed to adjust. The policy of fixing the exchange rate is not correct,” he said.

Mansur added that such controls could push up rates in the curb market and create instability across the foreign exchange market. He also noted that the gap between curb market rates and rates offered through banking channels had widened.

Dollar demand rises

A senior Bangladesh Bank official said government LC payment pressure has increased this week, creating some pressure on the dollar market.

According to Bangladesh Bank’s Economic Indicators report, import settlements through LCs reached $70.4 billion in FY26, marginally higher than $70.3 billion in the previous fiscal year, representing only 0.09% year-on-year growth.

Meanwhile, remittance inflows in June were the lowest in eight months.

A senior official of a private bank said dollar outflows are currently higher than inflows, creating some pressure on the foreign exchange market.

The central bank has also suspended dollar purchases from banks for the past one and a half months amid pressure on the taka to depreciate. In FY26, the Bangladesh Bank purchased $6.4 billion when the taka was under appreciation pressure. Its last dollar purchase was on 4 June.

A senior commercial banker said the dollar market became highly volatile in late 2022 and warned that any central bank intervention should be carefully assessed to ensure it does not create further instability.