Remittance dollar rate falls amid weak demand, strong export growth

The exchange rate for remittance dollars has started to fall as demand from banks eases due to improved liquidity, reduced overdue import payments, and steady export growth.

On Thursday, banks paid Tk122.70-122.80 per dollar to buy remittance inflows – down Tk0.5-0.7 from mid-May when rates were around Tk123.20-123.30, according to treasury officials at several banks.

Bankers said many initially expected the dollar rate to rise after the central bank introduced a market-based exchange rate on 14 May. However, treasury heads of major banks informally agreed to cap the rate at Tk123, causing a sharp drop in the rate within a day of the central bank's announcement.

With export receipts rising and import growth remaining subdued, the demand for remittance dollars has declined in the interbank market. As a result, the remittance rate continues to fall in line with market dynamics.

Syed Mahbubur Rahman, managing director of Mutual Trust Bank, said the dollar market should be driven by demand and supply. After the market-based system was introduced, many feared the rate would go up. 

"But demand isn't what it used to be," he told The Business Standard.

He noted that new investments in the country have stalled, reducing capital machinery and intermediate goods imports. Meanwhile, banks have cleared most overdue import payments, while strong export inflows and reduced over-invoicing and under-invoicing have strengthened liquidity.

Bangladesh Bank data show that exports reached $44.95 billion between July and May in FY25 – 10.36% higher than the same period last fiscal. Imports opened via LCs reached $58.94 billion in the July-April period, growing only 2.98% year-on-year. LC settlements reached $58.82 billion, up 6.08%.

Remittance inflows from July to 21 June stood at $29.5 billion – a 26.7% increase from $23.29 billion a year ago. Analysts say remittances would have been even higher if banks had not remained closed for nearly 20 days during Eid.

Pvt sector cuts dollar borrowing

Despite a $454 million rise in short-term foreign debt in the private sector between February and April – aided by favourable rates, stable reserves, and low volatility – overall demand for dollars remains soft.

Policy officials at several banks told TBS that dollar demand is unlikely to rise sharply in the coming months. Most investors are awaiting the upcoming national election before committing to new projects, meaning import demand related to investment will remain low.

In contrast, export and remittance growth is likely to continue, which will further increase dollar supply and keep the exchange rate under pressure.

The country head of a foreign exchange house said, "Earlier, banks used to call us for dollars. Now we call them, and many don't even want to buy. Some state-owned banks that were active buyers a month ago have stopped collecting remittance dollars."

He added that the rate is now dropping by Tk0.5–0.1 daily.

According to Bangladesh Bank, gross foreign exchange reserves stood at $20.77 billion on 4 June. This is the fifth consecutive month that reserves have remained above the $20 billion threshold, providing further stability to the currency market.