In December 2024, Bangladesh faced a significant jump in US dollar prices, complicating the already challenging inflation landscape. The dollar's value surged, with businesses reporting opening letters of credit at Tk 126 per dollar, which has raised import costs substantially [47e96c09]. This increase comes at a time when inflation has remained above 9% since March 2023, prompting the central bank to raise the policy rate five times, now standing at 10% [47e96c09].
In response to the rising dollar prices, Bangladeshi banks have decided not to pay more than Tk 123 for US dollars, a directive from the central bank aimed at stabilizing the currency amidst soaring dollar prices that have reached Tk 126-127 [b867b5d2]. This decision has left importers grappling with inflated dollar prices, as the market has been unstable for the past two years, with volatility returning due to December import liability orders [b867b5d2].
The impact of the rising dollar is felt across various sectors, particularly in essential food prices, which have risen approximately 5% year-on-year. SM Mujibur Rahman from Meghna Group has warned that the increased costs of imports will likely lead to further price hikes for essential goods [47e96c09]. Zaved Akhtar from Unilever Bangladesh echoed these concerns, highlighting the challenges businesses face due to currency fluctuations and their effects on operational costs [47e96c09].
Additionally, Ferdous Ara Begum from BUILD criticized the inefficacy of the crawling peg system in stabilizing the currency, while Md Moshiur Rahman Dalim from Akij Steel predicted a 2% increase in production costs as a direct consequence of the dollar's rise [47e96c09]. Monjurul Alam from Beacon Medicare also emphasized the struggles faced by the drug sector amid these economic pressures [47e96c09]. M Masrur Reaz noted that the dollar's rise is closely linked to actions taken by the central bank to meet conditions set by the International Monetary Fund (IMF) [47e96c09].
Despite the challenges, remittance income has exceeded USD 2 billion in just 21 days, and the central bank's purchases from commercial banks have increased foreign exchange reserves to USD 24.98 billion, although the reserve stands at USD 20.16 billion per the IMF's BPM 6 method [b867b5d2]. In light of these developments, the Bangladeshi economy is bracing for a tougher inflation battle as the new year approaches, with both consumers and businesses feeling the strain of rising costs and currency instability [4a057fbd][ae7e41a9].