Current account deficit widens amid weak export growth

Bangladesh's current account balance deteriorated further in the first five months of the current fiscal year 2025-26, even though remittance inflows crossed $13 billion, due mainly to a widening trade deficit caused by higher imports and weak export growth.

According to the Balance of Payments (BOP) data released by the Bangladesh Bank today (13 January), the current account deficit stood at $696 million during July-November of FY26, compared to a deficit of $568 million in the same period of FY25. 

Economists and central bank officials said the higher deficit reflects a sharp increase in imports, while exports failed to keep pace.

A senior Bangladesh Bank official said higher imports of crude petroleum, refined petroleum products, fertiliser and capital machinery were the main drivers of the import surge. Crude petroleum imports rose by 37%, petroleum oil imports by 14% and fertiliser imports jumped from $960 million last year to $1.73 billion this year. Capital machinery imports also increased by nearly 10%.

Bangladesh Bank data show that the trade deficit rose by 18.52% year-on-year to $9.40 billion in July-November FY26, up from $7.94 billion in the same period last year. Imports during the period increased by 6.10% to $27.60 billion, while exports grew by only 0.60% to $18.19 billion.

The current account is a key component of the BOP, capturing a country's net trade in goods and services, income from abroad and current transfers such as remittances. Analysts noted that while strong remittance inflows often cushion the current account, a large trade deficit can still push the balance into deeper negative territory.

In FY26's first five months, remittances were around $2 billion higher than in the same period last year. However, the trade deficit was roughly $1.5 billion wider than a year earlier, offsetting much of the remittance gain and worsening the current account position.

Zahid Hussain, former lead economist at the World Bank's Dhaka office, told TBS, the deterioration was primarily driven by the trade deficit. "Imports have increased, which in itself is not bad for the economy, but exports have not grown accordingly. In fact, export growth has fallen to below 1%, which has widened the trade deficit and hit the current account," he said.

The economist added, "An increase in imports is not a bad thing for the economy; rather, it is a sign of a healthy economy. A decline in exports, however, is detrimental. Therefore, I believe it is essential to work on increasing the country's exports in the coming days."

Financial account in surplus

Despite the current account deficit, Bangladesh's financial account recorded a surplus of $1.23 billion in the first five months of FY26, a significant turnaround from a deficit of $1.01 billion in the same period last year. Economists attributed this improvement mainly to a surplus in trade credit and higher net aid inflows.

Trade credit stood at a surplus of $595 million during the period, compared to a deficit of $817 million a year earlier, while net aid inflows rose to $504 million from $269 million, marking an increase of more than 87% year-on-year.

Zahid Hussain said trade credit and net aid flows were the two key drivers behind the positive financial account. He noted that trade credit tends to turn negative when exports rise, but in the current context, weaker exports and higher deferred import payments have pushed it into surplus.

BOP remains positive

Thanks to the strong financial account surplus, Bangladesh's overall BOP recorded a surplus of $769 million in July-November FY26, compared to a deficit of $2.54 billion in the same period last year. Economists said the improvement highlights stronger external financing flows, even as pressures persist on the trade and current accounts.

However, analysts also pointed to a decline in short-term foreign borrowing by the private sector. According to economists, net repayments of short-term loans have increased as new borrowing has slowed, reflecting weak investment demand amid an economic slowdown.

Zahid Hussain said the fall in short-term borrowing does not indicate a lack of access to foreign credit, as reserves and dollar liquidity have improved and banks' credit lines have expanded. "Rather, it shows reduced demand for new loans due to sluggish private-sector investment," he said.