Bangladesh’s economy is set on a rebound with all its external transaction accounts showing an upswing pivoted by a surge in remittance, robust export growth and reduced import payments, economists say.
According to data released Thursday by the Bangladesh Bank, the country’s current-account deficit narrowed significantly, in the first place.
The deficit in current account that tracks the flow of goods, services, and investments into and out of a country was recorded at $226 million during the July-November period of the current fiscal year, in a downhill fall from $3.94 billion in the same period last year, according to the central bank’s statistics.
This improvement contributed to a sharp reduction in the overall balance of payments (BoP) deficit, which nearly halved despite a persistent financial-account shortfall. The BoP deficit stood at $2.47 billion during the five-month period, down from $4.90 billion in the same period of 2023.
The financial-account deficit also narrowed slightly, registering $581 million, compared to $811 million a year before.
Capital account of the BoP, however, surged to $168 million during the period against $59 million of the previous year.
Economists appreciate the positive trend in Bangladesh’s external financial balance, notwithstanding a spell of upheavals centering round the July-August political changeover.
“External balance is improving. The current-account deficit has declined substantially as remittances surged, export growth recovered, and imports remained subdued,” says Dr Zahid Hussain, an independent economist
“These factors explain the easing of pressure on foreign-exchange reserves,” he told the FE about the domino effect of the positive changes in the macroeconomic parameters.
However, Dr Hussain points to two areas of concern in the latest data.
“There are two worrisome factors. First, outflows under errors and omissions remain unusually large, which is puzzling at a time when capital flight is expected to have declined, if not halted. Second, the decline in imports is largely attributed to a drop in capital goods and intermediate goods unrelated to the ready-made garment (RMG) sector.”
This, he says, indicates “a lack of economic diversification”, needed to move away from overreliance on a sole sector.
Bangladesh’s trade-balance deficit also improved, narrowing to $7.88 billion, during the July-November period from $9.86 billion a year earlier.
Exports grew by 10.1 per cent while imports declined by 1.2 per cent during the period.
The apparel sector continued on its impressive performance, with exports having expanded by 12.3 per cent to $16.11 billion.
Another economist, Dr M. Masrur Reaz, chairman of the Policy Exchange of Bangladesh, feels that Bangladesh’s economy is set to rebound as its external side is doing better than in the previous period.
“The exchange-rate volatility is easing,” he told the FE about the healing impact of the improvements in external accounts, adding that this will contribute much for the BoP in the coming months.
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