From the onset of the new year, Bangladesh Bank is set to adopt a more market-driven approach to determining the dollar exchange rate.
To this end, the central bank will collect daily data on dollar transactions by noon and publish a mid-rate thereafter.
Institutions trading dollars at prices above the declared rates may face penalties ranging from Tk10 lakh to 5% of the transaction value.
Additionally, when selling dollars from its reserves, the central bank plans to adopt an auction-based system, replacing its previous practice of favouring select banks and businesses.
The International Monetary Fund (IMF) has advised Bangladesh to implement market-driven dollar rates by the end of this year.
As part of this strategy, Bangladesh Bank convened a meeting yesterday with the top 25 banks dealing in foreign exchange, where it outlined its forthcoming policies.
These plans are expected to be formalised through a circular today.
The meeting included Managing Directors and Treasury Heads of several banks, alongside Governor Ahsan H Mansur and senior officials representing the central bank.
BB governor emphasised during the meeting that those trading dollars above the declared rates would face strict penalties.
Furthermore, the exchange rates for remittances and export proceeds must be standardised, allowing up to 2.5% above the Tk119 benchmark.
Banks will be permitted to sell dollars at a margin of Tk1 above their purchase price.
Bangladesh Bank Spokesperson Husne Ara Shikha said that the bank has capped the exchange rate for remittance inflows at Tk123 per dollar.
Monitoring mechanisms have been established through a dashboard system to oversee exchange rates.
The foreign exchange market has been unstable for nearly two-and-a-half years, with the dollar rate escalating from Tk85 to Tk120 during this period.
Under the previous government, experimental policies by Bangladesh Bank exacerbated the crisis.
Efforts to stabilise the market by selling dollars from reserves halved the reserve levels.
Following the government's change, Governor Ahsan H Mansur ceased selling dollars from reserves and set a fixed rate of Tk120 with a permissible fluctuation of 2.5%.
These measures brought relative stability to the market, leading to an uptick in remittances and halting the reserve's decline, which has now started to recover.
The central bank now aims to fully liberalise the dollar exchange rate in the coming days.
The meeting also discussed how inconsistent pricing—ranging from Tk120 to Tk127 at different banks on the same day—disrupts market equilibrium.
The bank plans to monitor daily dollar transactions to ensure consistency, streamline intermediary involvement, and stabilise rates for remittances and export earnings.
BB attributed recent market instability to heightened demand for dollars due to December’s debt repayment schedules.
The IMF’s directives to halt dollar sales from reserves further constrained supply, and Bangladesh’s downgraded credit rating hindered relationships with foreign banks, complicating import transactions and offshore banking operations.
It also highlighted that unilateral practices by intermediaries in remittance collection and the mismatch between supply and demand among commercial banks have exacerbated exchange rate instability.
As the central bank moves to align its policies with IMF recommendations, hopes remain high for a more stable and transparent foreign exchange market.
