Exports, remittances push BOP toward stability
Bangladesh's exports in May were $4.74 billion, highest in 11 months
Bangladesh's balance of payments is steadily improving, thanks to rising remittance inflows, stronger exports, and subdued imports.
As a result, the overall balance of payments (BOP) deficit stood at $656 million during July to April of the current fiscal year, an 88% drop from the $5.57 billion deficit recorded in the same period a year earlier.
Exports in May reached $4.74 billion, the highest in 11 months, while inward remittances hit nearly $3 billion, marking a robust recovery on both fronts.
Bangladesh Bank officials said the BOP position is expected to improve further once May's export and remittance figures are formally added.
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Speaking to The Business Standard, Professor Mustafizur Rahman, distinguished fellow at the Centre for Policy Dialogue (CPD), said the high deficit in the last fiscal year had placed considerable strain on the country's foreign exchange reserves. "However, as the deficit has narrowed in the current fiscal year, the pressure on our reserves has eased," he said.
"If imports increase in the future, the trade deficit may widen. We need to start preparing now so that we can manage the situation effectively when that time comes"
He credited the improvement to a stronger performance in the current account of the balance of payments, particularly driven by non-debt inflows.
According to Bangladesh Bank data, by the end of April, the country's current account deficit of the country's external balance narrowed sharply, falling by $4.64 billion year-on-year, to $1.39 billion, despite the macroeconomic instability since July 2024.
Current account balance is calculated by adding primary and secondary net income to the trade balance – the difference between exports and imports.
As per the central bank data, remittance inflow rose by 28.3% year-on-year, a $5.42 billion growth, in the July-April period, reaching a remarkable $24.54 billion compared to $19.12 billion a year earlier.
On this, Prof Mustafizur said, "The growth in remittance and exports has significantly improved our current account deficit. This is very positive news for us."
"The inflows in the current account are debt-free, meaning they do not create future liabilities for the country. We need to ensure that the current robust flow of remittances and exports continues," he explained.
Trade deficit eases slightly
According to the central bank, the trade deficit , the gap between exports and imports, declined slightly at the end of the current fiscal year. This was mainly because exports performed better compared to the same period (July to April) of the previous year.
The deficit stood at $18.23 billion in July-April of FY25, down 2.51% from $18.70 billion in the same period last fiscal year.
Exports grew 8.6% in the 10-month period, while imports rose by 4.6%.
However, experts warn that the subdued import of capital machinery may be a sign of sluggish investment.
Mustafizur Rahman noted that while export performance remains strong, import activities have yet to pick up momentum.
"In particular, the import of capital machinery has dropped significantly compared to earlier periods," he said. "If imports increase in the future, the trade deficit may widen. We need to start preparing now so that we can manage the situation effectively when that time comes," he added.
Financial account surplus declines
The surplus of the financial account, one of the main components of the country's balance of payments, decreased to $1.96 billion during the July-April period of FY25, down from $2.25 billion a year earlier – decreasing by about $286 million.
This change in the balance of the financial account was mainly driven by a decrease in foreign investment and aid from various donor agencies.
Expressing optimism, Prof Mustafizur noted that the financial account could improve soon.
"In the coming weeks, we expect budget support from the World Bank, ADB, and other development partners, which will likely strengthen the financial account," he added.
Record monthly export in May
Bangladesh posted its highest monthly export earnings in 11 months this May, reaching $4.74 billion, according to data from the Export Promotion Bureau (EPB) published on Tuesday (3 June).
This surpassed the previous peak of $4.63 billion in December.
Compared to April, exports in May jumped by 57%, and were up 11.45% year-on-year.
Exporters say the unusually high figure in May was partly due to a shift in shipment schedules. Some shipments planned for June were dispatched earlier, ahead of the Eid-ul-Adha holidays, while some delayed April consignments were also shipped in May, due to Eid-ul-Fitr holidays.
"The spike in May's exports is partly because of earlier shipment of June orders and some spillover from April"
As a result, export figures may see a slight decline in June, they added.
Despite uncertainty over potential tariff decisions under a future Trump administration, given that the United States is Bangladesh's largest export market, exporters say the flow of inquiries from buyers for the upcoming months remains encouraging, resulting in the likely continuation of the overall export growth.
"The spike in May's exports is partly because of earlier shipment of June orders and some spillover from April," said MA Rahim Feroz, vice chairman of DBL Group, a leading RMG exporter.
"Our export forecast remains good for the coming months, provided there are no major disruptions such as a US tariff hike or domestic political instability," he said.
EPB data shows that Bangladesh's total exports from July to May of FY25 reached $44.95 billion, 10% higher than the same period last year.
Garment exports, which account for the bulk of Bangladesh's export earnings, rose by 11.85% in May. Leather and leather goods rose by 35%, jute and jute products by 17%, home textiles by 9.71%, and engineering products by 12%. However, agricultural exports declined by 8% during the month.
