Bangladesh’s current account is projected to fall into deficit again between July and January, owing to an increase in payments for transportation and other services.
The current-account deficit amounted to more than half a billion dollars ($552 million) over the final seven months, reversing a surplus purse of US$56 million in the July-December period of the previous fiscal year.
During the review period, a net outflow of $2.641 billion was observed for services. It was slightly more than $2.0 billion over the same period last year, and $2.169 billion from July to December of this fiscal year.
The financial-account surplus has shrunk relative to the first half of the year, reflecting increased net short-term-credit outflows.
During the July-December or H1 of the fiscal year, financial-account surplus was $1.187 billion. During the July-January period, the surplus dropped to $850 million.
The deficit in overall balance has spiked relative to the first half, although still significantly lower than in July-January FY24.
During July-December of this fiscal year, the overall balance of payments (BoP) was recorded $412-million deficit. It spiked to $1.17 billion deficit during the past seven months ending January.
However, during the July-December period of last fiscal year (2023-24) it was substantially deficit at $4.687 billion.
Economists say the country’s current account is back into deficit primarily because of a spike in payments on account of transportation in the services account.
They believe that the BoP accounting has improved because there are fewer mistakes and omissions than in the first half.
“Overall, the evidence demonstrates the vulnerability of our foreign balances,” argues independent economist Dr. Zahid Hussain.
“It’s impossible to imagine how the external balance would be if import payments weren’t as muted as they are now,” he says. It is an unmistakable cautionary tale about policymaking complacency.
The FE was informed by another economist, Dr. M. Masrur Reaz, Chairman and CEO of Policy Exchange Bangladesh, that the “errors and omissions” in the balance of payments still amount to a substantial amount of $1.7 billion and are an issue of transparency.
In order to reduce these disparities, he stresses the importance of appropriate monitoring and data recording.
In the meantime, the trade imbalance increased from $9.766 billion during the July-December period of this fiscal year to $11.747 billion for the same period.
This rapid increase is explained by a 3.3% increase in imports to $38.114 billion between July and January.
However, over the same time period, exports (f.o.b.) rose 10% to $26.367 billion.
The capital account increased by 43% to $232 million over this fiscal year’s July–January period.
