BB’s net sale $800m monthly in FY24 Situation reversed from FY25 Nov net purchase $47.5m Banks have enough USD stocks
The Bangladesh Bank (BB) in a major policy shift intensifies its focus on buying more US dollars from the market to protect the country’s fast-depleting foreign exchange (forex) reserves, officials and bankers have said.
This change in the strategy is not only helping reduce the net sale of foreign currencies largely from the reserves but also improving the build-up of confidence among the global rating agencies riding on the growing reserve stock, they said.
The central bank in the last financial year sold $12.8 billion to banks, facilitating them to settle their overseas payments amid the forex dearth, and bought $3.38 billion from the market. As per the buy-sell scenario, the monthly net dollar sale was around $800 million, according to the official data.
From the start of this fiscal year, things started reversing as the central bank sold $678 million in July 2024 against the purchase of $105 million, causing the net dollar sales to drop to $573 million.
In the following month, net sales plummeted to $160 million as the central bank sold $170 million while buying $10 million from the market.
The downtrend continued further, with net sales dropping to only $22.5 million in September. In October, the BB purchased $47 million from the market against the sale of $20 million. Net US dollar sales turned negative after a long time, with net purchase reaching $27 million.
In November, net dollar purchases rose to $47.5 million as the central bank did not sell a single cent, the official data showed.
Seeking anonymity, a BB official said the significant rise in the net dollar purchase became clear soon after the new governor took charge in mid-August following a regime change through the July-August student-led mass uprising.
To heal many of the persisting macroeconomic ills caused by the continuous bleeding of the rapidly-depleting forex reserves, the official said, the governor decided not to sell the precious foreign currency but to concentrate more on buying the greenback from the market.
Mentioning the buy-sell trend of the dollar in the just-past November, the central banker said the banking regulator sold nothing against the purchase of $47.5 million.
“This is remarkable. I think it is a good policy and should have been adopted much earlier to protect our reserves from rapid depletion.”
Responding to a question, another central banker preferring anonymity said commercial banks have enough stocks of the American greenback, thanks to the rising inflow of remittances and export receipts.
“So, the central bank’s enhanced concentration on dollar purchase from the market will not create any problems for commercial lenders to settle letters of credit (LCs).”
Instead, it would help build confidence among the global rating agencies to see the economy in a more positive way while corresponding global banks would feel more comfortable treating Bangladesh’s LC requirements, according to the central banker.
Dr M Masrur Reaz, an economist and chairman of Policy Exchange of Bangladesh, also sees it as a positive change in the BB strategy to maintain price stability in the forex market and strengthen reserves.
“I think this should have been done much earlier. Then we may not have seen such a fall in reserves. Now, the forex regime will be more market-driven,” he says.