Trade deficit widens 29% in first two months of FY27
Strong remittance inflows lift current account surplus despite pressure on overall external balance
Highlights:
- Bangladesh's trade deficit widened 29% to $3.82 billion
- Imports rose 12.1%, outpacing 5.8% export growth
- Remittances surged nearly 19%, lifting the current account surplus
- Petroleum import costs more than doubled to $2.49 billion
- Financial account outflows pressured Bangladesh's overall external balance
- Foreign loan disbursements fell sharply, weakening development project financing
Bangladesh's trade deficit widened 29% year-on-year to $3.82 billion in the first two months of the current fiscal 2026-27 as import payments rose faster than export earnings, Bangladesh Bank data showed.
The trade deficit was $2.96 billion in July-August of the previous fiscal year.
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Imports rose 12.1% year-on-year to $12.20 billion in July-August, while exports increased 5.8% to $8.38 billion, according to the central bank data.
Despite the widening trade gap, the country's current account surplus more than tripled to $599 million during the period, from $197 million a year earlier, largely supported by strong growth in workers' remittances.
Remittance inflows increased nearly 19% to $5.83 billion in the first two months of FY27. Remittance growth was 16% during the corresponding period of the previous fiscal year.
BB data also shows gross official foreign exchange reserves stood at $37.35 billion at the end of August, equivalent to $32.44 billion under the IMF's BPM6 accounting standard, providing roughly 5.2 months of import cover.
Higher petroleum import costs widen trade gap
The rise in import payments was driven largely by a sharp increase in petroleum imports and higher costs of industrial raw materials.
Petroleum imports more than doubled to $2.49 billion in July-August of FY27, from $1.25 billion in the same period a year earlier.
Zahid Hussain, former lead economist at the World Bank's Dhaka office, said the increase in petroleum import costs was the main reason behind the rise in overall import expenditure.
"Petroleum import expenditure increased by more than 115%. This was the main reason behind the 12% increase in import expenditure," he told TBS.
He added that capital machinery imports did not contribute to the increase in import expenditure and that some pressure was visible in the balance of payments.
Ready-made garment exports, the country's main export earner, rose 5.3% to $7.49 billion during the period.
Financial account remains under pressure
Economists said the improvement in the current account was not enough to ease pressure on the country's overall external balance, as the financial account recorded a larger outflow.
Fahmida Khatun, distinguished fellow at the Centre for Policy Dialogue, said Bangladesh Bank data showed that the trade gap was widening because imports were growing faster than exports, while strong remittance growth helped increase the current account surplus.
"But the financial account recorded a larger outflow, due to which the deficit widened," she said.
Zahid Hussain said the widening financial account deficit had contributed to a larger deficit in the overall balance of payments.
He attributed the deterioration mainly to a 61% decline in medium- and long-term loan disbursements and a negative position in trade credit.
Medium- and long-term loan disbursements fell 60.9% year-on-year to $291 million in July-August, while amortisation payments stood at $572 million.
Lower foreign project financing
Bangladesh also used less foreign financing for development projects during the period, although the available data do not establish that delays in project implementation were the main reason.
Project-related foreign fund utilisation can be affected by delays in project work, approvals, tendering and procurement, as well as unmet conditions attached to some loans.
Fahmida said the government should review delayed projects with each development partner, identify specific obstacles, resolve them promptly and publish regular updates on project progress and fund disbursement.
She also called for policies to strengthen export earnings and diversify products and markets, while urging greater efforts to bring remittances through formal channels.
