Bangladesh's financial account deficit reached $3,965 million in the first four months of the current FY24 (July-October), against a surplus of $1,276 million in the same period of FY23.
The financial account, encompassing capital flows such as foreign direct investment, foreign loans and grants, portfolio investments and changes in reserves, reflects the outcomes of these economic dynamics.
Similarly, the deficit in trade services expanded in July-October of FY24, totalling $1,699 million compared with that of $1,387 million in the corresponding period of the previous financial year.
The financial account recorded a deficit of $2.14 billion in FY23 against a surplus of $15.45 billion in FY22.
A decline in foreign direct investments, diminished net foreign loans and grants, and a drop in foreign portfolio investments were the prime factors behind the deficit, according to bankers.
The Bangladesh Bank used the country’s foreign currency reserves, selling approximately $27 billion over the past 29 months.
Of this amount, $5.8 billion was allocated to banks in July-November of FY24, $13.5 billion in FY23, and $7.62 billion in FY22.
Bankers attributed the decline in foreign loan inflow to the ongoing economic crisis, substantial deferred payments and downgrades in sovereign and bank ratings by Moody’s.
However, there was a positive shift in the trade balance, with the trade deficit narrowing to $3.8 billion in July-October of FY24 from $9.62 billion in the same period of the previous year, primarily due to reduced imports.
Consequently, the country has made notable progress in addressing the current account deficit, with a surplus of $233 million recorded in July-October of FY24, a significant improvement from the $4.48 billion deficit in the same period of 2022, driven by increased export earnings.
In the first four months of FY24, the country’s import payments declined by 20.54 per cent to $20.26 billion compared with those of $25.51 billion in the same period in the previous year.
Bangladesh’s export earnings in July-October of FY24 rose by 3.61 per cent to $16.46 billion compared with those of $15.88 billion in the same period of FY23.
The country’s trade deficit reached a record high of $33.25 billion in FY22 from $23.78 billion in the previous financial year.
