Bangladesh recorded a positive current account balance of $537 million in July FY24, compared to negative $449 million posted during the same month last year.
However, due to the low growth of new aid, investments, foreign loans, and increased repayment of such liabilities, the country’s overall balance of payment was actually negative $1.06 billion during the period, show central bank data released on Tuesday.
The central bank covers such deficits from the foreign exchange reserves, and this is one the key reasons Bangladesh has been largely unsuccessful in curbing the steady decline of the reserves, economists say.
Medium and long-term (MLT) foreign investments declined to $405 million in July FY24 – a year-on-year 15.45 per cent decrease from $479 million. In the same period, the repayment of MLTs rose by 25.74 per cent to $171 million, compared to $136 million year-on-year.
Bangladesh’s trade deficit narrowed by 69.73 per cent year-on-year to $635 million in the first month of ongoing FY, made possible by a slower import growth compared to export growth.
In July this FY, import payments declined by 14.92 per cent to $4.99 billion, when compared year-on-year. Moreover, the country’s export earnings grew 15.61 per cent to $43.56 billion in the first month of FY24, show central bank data.
The country’s financial account deficit stood at $895 million in July FY24, compared to $66 million posted in the same month last year. Import growth slowed following a number of measures aimed at curbing imports amid the ongoing pressure on forex reserves.
Commenting on the matter, economist AB Mirza Azizul Islam said, “The opening of LCs did not come down as expected despite austerity measures taken by the government, which is very concerning.
“If this happened while importing essential commodities and oil, then it is alright, but if this happened because of the imports of luxury or non-productive goods, then it is bad news.”
Bangladesh Garment Manufacturers and Exporters Association (BGMEA) President Faruque Hassan said, “The USD crisis in the country is the key reason behind declining imports.
“The demand has decreased for some products, so the importers have not opened the number of LCs they usually do. We are now exploring fresh markets and buyers, especially in the Middle East and North America.”
Calculated under the International Monetary Fund’s (IMF) BPM6 formula, Bangladesh’s forex reserve stood at $23.37 billion in July FY24. The gross forex reserves reached the record highest at $48 billion in August 2021.
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