Remittance inflows lift current account to surplus despite trade gap
The overall balance of payments stood at a deficit of $53 million in the first two months of FY26, a sharp improvement from $1.43 billion in the same period last year
The country's current account balance turned positive in the first two months of the 2025-26 fiscal year, driven by strong remittance inflows despite a widening trade deficit.
According to Bangladesh Bank data, the current account posted a surplus of $483 million in July-August, up sharply from $191 million in the same period of the previous fiscal year. The sustained remittance inflow has also contributed to a gradual rise in foreign exchange reserves, with the gross reserve surpassing $27 billion.
Remittance inflows have remained above $2 billion per month since August 2024, with a record $3.29 billion received in March 2025 – the highest monthly figure in Bangladesh's history. The strong inflow of remittances and export earnings has allowed the Bangladesh Bank to purchase over $2 billion from commercial banks through auctions as of 9 October.
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The overall balance of payments stood at a deficit of $53 million in the first two months of FY26, a sharp improvement from $1.43 billion in the same period last year.
Economists noted that the improvement in the overall balance of payments was largely driven by a smaller deficit in the financial account alongside the current account surplus. Although the balance of payments remains in deficit, it has narrowed considerably compared with last year.
Zahid Hussain, former lead economist at the World Bank's Dhaka office, emphasised the role of remittances. "The flow of remittances has played the most significant role in turning the current account into a surplus. That's why the current account hasn't been impacted, even though the trade deficit has increased," he told TBS.
Md Mazadul Hoque, chairman of the Policy Think and Economic Research Centre, echoed this sentiment, stating, "The trade deficit has increased compared to before, but the increase in remittance inflow is the reason for the current account surplus in July-August."
Trade deficit rises
The trade deficit has widened to $2.99 billion in the first two months of the current fiscal year due to growth in imports.
Central bank data shows that imports in July-August increased by 9.80% year-on-year to $10.89 billion, up from $9.91 billion in the previous year. Exports also saw a rise of 10.70% to $7.93 billion, compared to $7.16 billion previously.
Zahid Hussain views the increase in imports as a positive sign for the broader economy. "The trade deficit has grown because of the increase in import growth. However, this has not affected the current account," he noted, adding, "An increase in imports is positive for the overall economy, as imports are necessary to revitalise the economy. If imports increase, the country's economic growth will follow."
Financial account deficit narrows
The financial account deficit fell to $528 million in the first month of FY26, compared with $1.17 billion in the same period a year earlier. Economists attributed the improvement to reduced trade credit deficits and a sharp increase in medium- and long-term loan inflows.
Bangladesh Bank data show that medium- and long-term loan disbursements reached $741 million in July, up 91% from $387 million in the same month last year.
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Zahid Hussain explained, "A smaller trade credit deficit means that exporters are repatriating their earnings faster, which is helping the financial account recover."
