Export-remittance rise, import fall tip trade balance up

Bangladesh's current-account balance returned into green zone in August, after months of negativity, mainly as lower import expenses and higher inflow of remittances tipped the balance up, officials said.

The country recorded a current-account surplus of US$111 million during the July-August period of the current fiscal year (FY), 2024-25, against a deficit of $610 million in the same period of the previous fiscal. It had a deficit of $206 million in July, the first month of this fiscal, according to the statistics of Bangladesh Bank (BB).

The country's trade gap with the rest of the world narrowed by over 9.0 per cent to $2.75 billion during the period under review from $3.04 billion in the same period of the previous fiscal year, the data showed.

During the period, import expenses fell by 1.20 per cent to $9.91 billion from $10.03 billion in the same period of FY'24 while export earnings grew by 2.50 per cent to $7.16 billion from $6.99 billion.

On the other hand, Bangladesh received $4.14 billion in remittances during the first two months of this fiscal year, registering a 15.80-percent growth year on year, the BB data showed.

Seeking anonymity, a BB official says the current account turned positive, after months of remaining in the negative territory, mainly because of higher inflow of remittance and lower import expenses.

Alongside nearly 16-percent remittance increase, he notes, the country managed to maintain a nominal export growth in the first two months of this fiscal while the import expenditure dropped by 1.2 per cent during the period of time.

"This basically helps turn the current account positive," the official says about the trade arithmetic.

But the central banker is not optimistic about maintaining the trend in the current account as the imports are expected to increase in the months ahead riding on a stable political atmosphere.

"So, it will be difficult in maintaining surplus trend in the coming days," he predicts.

The country's financial -account deficit narrowed to $145 million during the period under review from $1.34 billion in the same period of FY'24. It was surplus $196 million in July 2024.

Actually, higher external spending against lower earnings pushed down the country's overall balance of payments (BoP) to $1.40 billion during the period under review from $1.69 billion in the same period of FY'24 despite an improvement in current-account balance.

Talking to the FE, Mustafa K Mujeri, executive director of the Institute for Inclusive Finance and Development (InM), urged the policymakers to take effective measures to further boost export earnings, particularly from ready-made garments, to ease pressure on the country's external front.

"The policymakers should give attention to diversifying export earnings by strengthening other export -potential sectors," the senior economist suggests.

Mr Mujeri, also a former chief economist of the central bank, says imports, particularly essential items, are expected to be increased in the near future that will also help bring dynamism in the country's overall economic activities from the current state of sluggishness.

Former lead economist of World Bank's Dhaka office Dr Zahid Hussain says the export earnings grew by 2.5 per cent in July-August period, which is quite remarkable at a time when the overall economic activities were almost at a standstill because of the mass uprising.

Regarding the financial account, the noted economist says access to short-term external loan is not active properly while the country continues repaying the debt liabilities.

"The component of trade credit is still in negative zone, meaning that the export-receipt growth does not pick up proportionately with the export earnings."

He terms the large deficit in overall balance a concern for the economy.

Dr M Masrur Reaz, an economist and chairman of the Policy Exchange of Bangladesh, mentions that the country went through a tough time in- between Mid-July and Mid-August because of recent mass uprising that led to the fall of the Sheikh Hasina government on August 05, 2024.

As a matter of fact, he says, the importers postponed import process because of the protest-driven disruptions. "This is probably the main reason behind drop in the import businesses," he said.

But, after the change of regime, a positive vibe of structural change with the resumption of freedom of speech and human rights is created among the migrant workers and NRBs (non-resident Bangladeshis), he notes.

"And it is probably encouraging them to send more remittance back home, which is reflected in the current account," Dr Masrur says about the change of wind.

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