Trade gap widens to $3b amid surging imports, declining exports

The country's trade deficit has widened by more than $3 billion over the past year, driven largely by rising imports and weaker export earnings, according to the latest balance of payments data released by Bangladesh Bank.

The central bank published the figures today (9 April), showing that the country's trade deficit increased by $3.20 billion year-on-year during the July-February period of the current fiscal year.

Data show the trade gap stood at $16.91 billion in FY26 July-February, compared with $13.71 billion in the same period of the previous fiscal year.

According to economists, the widening deficit reflects higher imports alongside a slowdown in export growth.

During the first eight months of the 2025-26 fiscal year, Bangladesh's export earnings declined by 2.60% on a year-on-year basis. The contraction was mainly due to weak export performance in the ready-made garment sector and a sharp slowdown in February, economists said.

Zahid Hussain, former lead economist at the World Bank's Dhaka office, said, "Imports have increased compared to earlier levels, but exports are not performing as expected. As a result, the gap between the two has widened, increasing the trade deficit by more than $3 billion."

According to central bank data, during FY26 July-February, export earnings fell to $29.26 billion, from $30.03 billion in the same period a year earlier.

Meanwhile, imports during the first eight months of the fiscal year rose to $46.17 billion, up from $43.74 billion a year earlier – an increase of 5.60%.

Zahid further said, "Imports of food items and fertiliser have increased compared to earlier. It is also possible that these were imported in advance, even before the Iran war. As a result, the shortages that are being feared in the coming period may not materialise."

Infographics: TBS

Current account deficit narrows to $1b

Despite the widening trade deficit, the country's current account balance has improved slightly.

According to Bangladesh Bank data, the current account balance stood at a deficit of $1 billion in the current fiscal year, compared to $1.47 billion in the same period of the previous fiscal year.

In August of the current fiscal year, the current account balance was positive at $483 million. In general, a lower trade deficit improves the current account balance. The smaller the trade gap and the stronger the remittance inflows, the better the current account position becomes.

Although the trade deficit widened during the July-February period, strong remittance inflows helped limit the current account deficit to $1 billion. In the same period last year, the deficit stood at $1.42 billion.

Zahid said the strong flow of remittances had played a crucial role in containing the deficit.

"The most notable point is that even though the trade deficit has exceeded $17 billion and increased by more than $3 billion over the year, the current account deficit is only about $1 billion," he said.

"The main reason is the higher remittance inflow. Without that, the current account deficit could have been much larger."

Remittance inflows reached $22.45 billion during FY26 July-February, compared with $18.49 billion in the same period of the previous fiscal year.

The current account is a key component of a country's balance of payments, covering net trade in goods and services, income from abroad, and current transfers such as remittances.

Financial account improves sharply

The financial account also improved significantly during the period.

According to Bangladesh Bank data, the financial account stood at $4.08 billion in FY26 July-February, compared with $435 million in the same period of the previous fiscal year.

Experts say the improvement was largely driven by trade credit.

Trade credit stood at $2.56 billion during FY26 July-February, compared with a negative $1.12 billion in the same period last year.

A positive trade credit balance indicates that outstanding payments from previous exports have entered the country, while a negative balance means export earnings remain unpaid.

Md Ezazul Islam, director general of the Bangladesh Institute of Bank Management (BIBM), said the financial account had strengthened during the current fiscal year. "A positive financial account means this amount of money has entered the country. However, after a certain period, these funds will have to be repaid," he said.