Current account swings to surplus in July on remittance, export growth

Highlights:

• Bangladesh posts first current account surplus in fiscal 2025-26
• July remittances surge 30% to $2.47 billion
• Exports rise 27%, imports 20%, trade deficit slightly widens
• Financial account deficit grows, foreign investment and loans decline
• Reserves strengthen to $25.98 billion under BPM6 method
• Bangladesh Bank buys $1.74 billion to stabilize currency

Bangladesh recorded a current account surplus in the Balance of Payments (BoP) in July, the first month of the 2025-26 fiscal year, supported by robust growth in exports and remittances. 

According to Bangladesh Bank data, the current account balance stood at $245 million in July, compared with a deficit of $181 million in the same month last year.

Remittances had been particularly strong, with expatriate Bangladeshis sending home over $2 billion for 13 consecutive months. In July alone, remittances grew by nearly 30%, reaching $2.47 billion, up from $1.91 billion in the previous year.

Infograph: TBS

Experts and treasury heads attribute this rise to the stabilisationof the dollar's exchange rate through the banking channel, which helped set a new record of $3.29 billion in March.

Export earnings also saw a robust increase of 27.10% in July, reaching $4.42 billion, compared to $3.48 billion in the previous year. Meanwhile, imports grew by 19.90%, amounting to $5.92 billion in July, up from $4.94 billion.

Dr Zahid Hussain, a former lead economist at the World Bank's Dhaka office, told TBS that the sustained rise in both exports and remittances had shifted the current account into surplus. "This is a positive development for the balance of payments," he said.

Trade deficit widens slightly

Despite the export growth, imports outpaced exports, pushing the trade deficit slightly higher. The gap reached $1.50 billion in July, compared with $1.46 billion a year earlier – a 2.74% increase.

Dr Zahid noted that both exports and imports were above their monthly averages, reflecting an active economy. "The rise in imports should not be a cause for concern as it will support economic dynamism," he added.

The central bank's foreign exchange reserves are also increasing, driven by the strong performance of remittances and exports

Financial account in deficit

While the current account improved, the financial account deteriorated further. It posted a deficit of $718 million in July, up from $263 million a year earlier, driven largely by lower foreign investment and reduced inflows from donor agencies.

Bangladesh Bank data show medium- and long-term loan disbursements fell by 29.6% to $202 million in July, compared with $287 million last year. At the same time, repayments rose by 36% to $423 million.

Professor Mustafizur Rahman, a distinguished fellow at the Centre for Policy Dialogue (CPD), said political uncertainty has dampened loan inflows while repayments continue to rise. "More dollars are spent in the country than coming in, leading to a negative financial account," he observed.

Dr Zahid added that weaker project implementation has also limited disbursements, but expressed hope that the negative balance could ease in the coming months.

Reserves strengthen

The central bank's foreign exchange reserves are also increasing, driven by the strong performance of remittances and exports. According to the latest data from Bangladesh Bank, reserves have risen to $25.98 billion under the BPM6 method, with gross reserves at $30.88 billion.

The increased supply of dollars led to a decrease in the exchange rate, prompting the Bangladesh Bank to intervene by purchasing $1.74 billion from commercial banks through auctions in two months to stabilise the currency's value. 

A treasury head at a private bank noted that a slowdown in private sector loan growth has reduced the demand for capital goods, thereby lowering the overall demand for the US dollar.