When war in the Middle East sent fuel prices climbing, Bangladesh looked like an obvious casualty. An import-dependent economy with a thin reserve cushion and a recent history of dollar shortages had every reason to buckle. It has not.
Reserves climbed to $37.57 billion by June from $35 billion in February, according to the central bank’s gross measure. They have since fluctuated between $36 billion and $37 billion. For an economy that spent three years bleeding dollars, the turnaround is emerging as a fresh surprise for the external sector.
Under the International Monetary Fund’s BPM6 definition, which excludes funds not readily available to meet import bills, reserves hovered around $31.5 billion. That is comfortable, but a different order of comfort.
The shock it absorbed was not small. Balance of payments data show petroleum imports more than doubled last fiscal year, rising 107 percent to $10.64 billion, while fertiliser imports rose 42 percent to $3.72 billion.
Together, the two items cost the country about $6.6 billion more than a year earlier, and the spending has not eased since. In July this year, Bangladesh spent around $1.562 billion on petroleum and fertiliser imports against $875 million in the same month last year.
Liquefied natural gas, where the war’s effect has been sharpest, is not shown separately in the balance of payments. Petrobangla figures show that Bangladesh bought 112 LNG cargoes last fiscal year, including 49 from the spot market, compared with 40 cargoes the previous year.
LNG was bought at $24-$28 per mmBtu after the Middle East conflict began, against $12-$13 previously. The subsidy bill has moved with the price. Against less than Tk6,000 crore in a normal year, the government paid Tk14,500 crore last fiscal year. The Energy Division has told the Finance Ministry that LNG alone could require Tk 40,000 crore ($3.3 billion) this year.
Against all that, the overall balance of payments surplus doubled to $6.6 billion.
“Reserves are rising for several reasons,” said Salehuddin Ahmed, former finance adviser of the immediate past caretaker government and former governor of Bangladesh Bank. “One is that imports have been fairly limited. They have not risen much, so there is control there. Second, remittances are quite satisfactory. And third, garment exports are not doing badly at all.” Whatever drains out on one side, he said, is being covered from the other.
Zahid Hussain, a former lead economist at the World Bank’s Dhaka office, counts three too, though not the same three. “Mathematically, I would identify three reasons,” he said. “But the largest is the rise in remittances. If you asked me to name one, I would say remittances.”
The numbers support him. Remittances rose by more than $5 billion last fiscal year, Bangladesh Bank data show. Inflows have exceeded or stayed close to $3 billion every month since December and almost touched $4 billion in March.
His second reason is what did not happen elsewhere in the import bill. Set fuel aside, Hussain said, and import costs did not rise at all — growth was effectively zero. Excluding petroleum and fertiliser, imports came to $60.88 billion last fiscal year, against $60.8 billion the year before. Excluding petroleum, fertiliser and LNG, the rest of the import bill actually declined.
The third sits in the financial account, and is the least remarked upon. Net trade credit swung by more than $6 billion, from minus $3.15 billion to plus $3.09 billion.
Hussain offered two possible explanations, and both matter for how durable the comfort is. Export proceeds routinely arrive later than the shipments they pay for. Because exports did not grow last fiscal year, no fresh arrears accumulated while the previous year’s receipts came in, flattering the balance. Bangladesh has also not paid the whole of its import bill. Part of it, particularly for fuel, has been rolled into buyers’ credit — a deferral that shows up as a trade-credit surplus now and a payment obligation later.
On the remittance surge itself, Hussain pointed out that capital flight has not resumed at anything like its former scale since August 2024. The old operators have left the country, he said, and the economy is not yet in a state for new ones to begin.
Then there is policy. “Bangladesh has taken a position that it will not let the exchange rate appreciate,” Hussain said. “Whether that is the right policy is a separate question.” The stance incentivises remitters and, in his view, has helped draw more money into the country.
“Remittances come into the current account,” said Ahmed. “But even though they arrive there, the effect shows up in the financial account.”
Banks must keep their foreign currency within a net open position, and when a bank exceeds that limit, it has to surrender the excess to the central bank. Bangladesh Bank monitors every bank’s position daily.
“As inflows swell, the limit converts private dollars into official reserves more or less automatically,” Ahmed said.
The central bank also bought dollars outright, on a scale never seen before. It purchased around $6 billion last fiscal year, according to auction data. The purchases began in mid-July 2025 with two auctions, the first of their kind in the country. By setting a uniform cut-off rate at each auction, the central bank places a floor under the dollar. That floor has drifted upwards rather than down, from Tk 122.30 in the January and February auctions to Tk 122.75 through May and June.
Ahmed sees no fault in it. The purchases have helped build reserves, he said, and with demand for dollars subdued, the central bank did well to buy.
Others see a cost. Every dollar bought is paid for in taka, and unless the central bank withdraws the equivalent liquidity elsewhere, the purchases loosen monetary conditions at a time when the bank insists it is tightening.
The larger question is whether any of this can be repeated. Holding remittances at the level they have reached will be a challenge, according to Hussain, because the forces that lifted them have already been absorbed into the economy and there is little further benefit to extract.
“Sustaining the inflows now depends on raising migrant workers’ skills and opening new labour markets,” Hussain said.
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