External balance continues to improve, deficit falls 75% in Jul-Feb
Trade deficit also decreases by 4.41% during the period
The overall deficit in the country's Balance of Payments – known as the external balance – decreased by 75% in the first eight months of the fiscal 2024-25 compared to the same period last year due to a decline in hundi transactions leading to strong growth in remittance inflow, and export growth outpacing import growth.
According to Bangladesh Bank data, the overall Balance of Payments deficit stood at $1.11 billion during the July-February period of FY25, down from $4.44 billion at the same period a year ago.
"The decline in the overall deficit is certainly good news for our economy. The pressure on the country's foreign exchange reserves has eased considerably compared to before, and one of the key reasons for this is the reduction in the overall Balance of Payments deficit," Zahid Hussain, former lead economist at the World Bank's Dhaka office, told TBS.
At the end of February last year, the country's foreign exchange reserves stood at $20.78 billion as per the BPM6 standard. By the end of February, it slightly increased to $20.97 billion. As of the latest data on 28 March, the reserves stood at $20.35 billion. This indicates that the country's foreign exchange reserves have remained relatively stable over the past year.
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Commenting that strong export growth, healthy remittance inflows, and a surplus in the financial account played key roles in reducing the overall deficit, the economist said that around $2.2 billion in loans is expected to be received from the International Monetary Fund (IMF), World Bank, and Asian Development Bank (ADB) in the current fiscal year. "If these funds are received, the country's reserves will become even more stable."
Trade deficit falls 4.41%
As export growth has outpaced import growth, the trade deficit — the gap between exports and imports — decreased by 4.41% to $13.70 billion at the end of the July–February period of FY25 compared to the same period last fiscal year.
Zahid Hussain said, "The trade deficit has narrowed due to strong export growth. Although imports have increased, the rise is smaller compared to exports. However, a point of concern is that investment is not picking up."
While the country's macroeconomic stability has improved compared to before, he noted that a significant rise in investment is unlikely until a political government is in place.
Current Account deficit falls by $2.8b
Due to the upward trend in remittance inflows, the deficit in the Current Account Balance — another key component of the Balance of Payments — decreased by nearly $2.8 billion compared to the same period in the previous fiscal year.
In the first eight months of FY25, remittances amounted to $18.49 billion, 22.6% up from $15.08 billion in the same period a year ago.
Financial Account surplus rises to $1.42b
Due to the repatriation of overdue export proceeds and the inflow of aid from various donor agencies, the surplus in the Financial Account – the other key component of the Balance of Payments – rose to $1.42 billion during July-February of FY25.
