The dollar amounts held by Bangladesh鈥檚 commercial banks increased slightly in January after a fall to a five-year and six-month low in December 2024.
In January, commercial banks鈥� gross foreign currency balance increased to $4,537 million, up from $4,255 million in December, according to a Bangladesh Bank data.
The amount in December had marked the lowest level since June 2019 when balances stood at $4,191.18 million.
Bankers said that dollar holdings by banks increased in January probably due to a surge in remittance inflow and export earnings.
Total workers鈥� remittances inflow for July-January of FY25 stood at $15.96 billion which was 23.61 per cent higher compared with the same period of previous fiscal year.
During July-January of FY25, exports experienced a robust year-on-year growth of 11.58 per cent, reaching $28.97 billion.
The central bank had cleared most of its foreign dues within December which had played a vital role in reducing their dollar holdings, pushing the dollar price to as high as Tk 128 from Tk 120 in the reporting month.
The sharp rise in dollar prices has further burdened borrowers, requiring significantly higher funds to meet their foreign currency obligations.
As banks have already repaid their foreign dues, they managed to save dollar holdings in January.
Despite an increase in remittance inflows and export earnings in recent months, commercial banks鈥� dollar holdings, however, didn鈥檛 rise significantly.
Foreign direct investment has also plummeted amid political instability, compounding the economic challenges.
The reserves had been consistently declining in recent months, from $6,088 million in July to $5,265 million in August, $4,981 million in September, and $4,615 million in October.
Financial experts criticised the central bank for not extending repayment deadlines for major payments, which could have mitigated market pressure.
Adding to the crisis, Bangladesh Bank halted dollar sales to commercial banks to prevent further reserve depletion while simultaneously purchasing dollars to prop up reserves. This dual approach has worsened the already strained market.
The dollar shortage, which has plagued the banking sector since early 2022, continues to ripple through the country鈥檚 macro-economy, fueling inflation and driving up production and energy costs.
The crisis deepened after the political transition, as foreign debt repayment pressures mounted following the swearing-in of the interim government.
The exchange rate has surged steadily, from Tk 85.80 in December 2021 to Tk 104 in December 2022 and Tk 110 in December 2023.
By January 2024, the rate reached Tk 122, significantly raising import costs and escalating production and consumer prices.
Businesses warn that the higher dollar rates will exacerbate inflation, further reducing consumer purchasing power and worsening the country鈥檚 economic crisis.