Bangladesh Bank’s recent decision to buy US dollars from commercial banks has sparked discussion across financial circles. This move comes at a time when the country’s foreign exchange reserves remain under pressure, and the currency market is experiencing significant fluctuations. Despite earlier efforts to stabilize the taka through sales of foreign currency, the central bank has shifted strategy by purchasing dollars instead. Between July 1 and 14, it reportedly bought USD 418 million from local banks—an approach that may seem paradoxical in the current economic climate. The key reason for this move is to gradually rebuild foreign exchange reserves, which have seen notable declines over the past couple of years. By purchasing dollars, Bangladesh Bank aims to increase its reserve buffer to support future import payments, service external debts, and maintain confidence in the country’s external sector stability. Another contributing factor is the improvement in remittance inflows and export earnings, which has slightly eased pressure on the foreign exchange market. With more dollars flowing into the banking system, commercial banks have been holding excess foreign currency, prompting the central bank to step in and absorb the surplus. This approach aids in keeping a careful equilibrium within the currency market. Buying dollars prevents the local currency from appreciating too quickly, which could hurt export competitiveness. At the same time, it ensures that banks have enough liquidity in taka, allowing them to lend more effectively to businesses and individuals. Experts, however, have urged caution. While rebuilding reserves is crucial, they stress that interventions in the currency market should be transparent and based on strong macroeconomic indicators. A clear and predictable policy framework will also help prevent speculation and uncertainty among market participants. Bangladesh Bank’s actions must be seen in the broader context of its efforts to manage inflation, support growth, and stabilize the financial system. Foreign exchange policy plays a vital role in shaping investor confidence and ensuring economic resilience. Policymakers are now working to improve remittance flows, promote exports, and attract more foreign investment—all of which can contribute to a more stable currency environment. Enhanced regulatory oversight and coordination between fiscal and monetary authorities are also being considered to make the currency regime more robust and adaptive. In summary, Bangladesh Bank’s recent dollar purchases reflect a nuanced approach to managing the country’s foreign exchange needs. While the decision may appear counterintuitive at first, it aligns with broader goals of ensuring financial stability and preparing for future economic challenges.
