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Bangladesh's current-account deficit widened in the first five months of the fiscal year ending November last as sluggish export growth combined with a pick-up in imports, though the overall balance of payments remained comfortably in surplus.
The current-account deficit, or the key part of the overall Balance of Payments (BoP), stood at $696 million in July-November, compared with $568 million in the same period a year earlier, according to official data released on Tuesday.
By contrast, the overall BoP posted a surplus of $769 million, reversing a $2.54 billion deficit recorded a year earlier.
The turnaround was driven largely by the financial account, which registered a surplus of $1.23 billion during the period, compared with a deficit of more than $1.0 billion a year earlier.
Economists said the financial account surplus, together with unaccounted inflows recorded under errors and omissions, more than offset the widening current account gap.
They attribute the deterioration in the current account mainly to flat export earnings and rising imports.
Export receipts edged up by less than 1.0 per cent to $18.2 billion during the period, while import payments rose 6.1 per cent to $27.6 billion.
As a result, the trade deficit widened to more than $9.0 billion.
"An increase in imports reflects a recovery in domestic demand, which signals economic buoyancy," said Dr Zahid Hussain, an independent economist and a former lead economist at the World Bank's Dhaka office.
"But flat exports are a serious concern."
Dr Hussain mentioned that the financial account surplus was supported by a turnaround in trade credit, which moved from a large negative position to a small positive, alongside improved net aid inflows.
However, he cautioned that short-term credit remained a pressure point, recording a sizeable net outflow during the period.
Offering a more upbeat assessment, Dr Ezazul Islam, director general of the Bangladesh Institute of Bank Management (BIBM), said the financial account benefited significantly from stronger foreign direct investment (FDI).
FDI inflows rose to $671 million, up about 65 per cent from the corresponding period a year earlier, Dr Islam, who worked as executive director (research) at the Bangladesh Bank, said.
Net aid inflows were also robust, reaching $504 million, an increase of more than 87 per cent year on year, according to the official data.
Dr Islam said rising imports were consistent with an economy gaining momentum, pointing to a nearly 10 per cent increase in capital goods imports, which climbed to $4.3 billion during the period.
He said stronger inflows had eased external pressures for now, but warned that sustaining the BoP surplus would depend on reviving export growth as global demand remained uncertain following the recent US-Iran and US-Venezuela developments.
jasimharoon@yahoo.com