Bangladesh's balance of payments for FY24 showed resilience, despite global and local challenges, with significant improvements in key areas compared to FY23.
The current account deficit narrowed, though challenges remained in both trade and financial accounts.
According to Bangladesh Bank's (BB) latest statistics the current account deficit reduced to -$6.5 billion in FY24, or by 44.1 per cent improvement from -$11.6 billion in FY23. The improvement was driven by a decline in trade gap, though exports and imports declined.
The trade deficit narrowed by 18.1 per cent, standing at -$22.4 billion in FY24, compared to -$27.4 billion in FY23.
Export earnings fell by 5.9 per cent, primarily due to a dip in ready-made garment (RMG) exports, which declined by 5.4 per cent to $36.1 billion.
Meanwhile, imports declined by 10.6 per cent, reflecting weaker domestic demand and tighter foreign exchange controls.
Dr Zahid Hussain, former lead economist of the World Bank's Dhaka office, emphasised that while the narrowing of the trade gap is a positive sign, the decline in exports highlights the need for greater diversification beyond the RMG sector. He said, "Bangladesh must focus on expanding its export basket to mitigate vulnerabilities stemming from global demand fluctuations."
Secondary income provided a positive boost to the current account, with private transfers rising by 10.2 per cent, driven by an uptick in workers' remittances, which increased by 10.7 per cent to $23.9 billion.
The financial account surplus showed a mixed picture, standing at $4.5 billion in FY24 compared to $6.9 billion in FY23. While foreign direct investment (FDI) inflows saw a modest decline of 6.1 per cent, falling to $4.2 billion from $4.4 billion, net FDI liabilities grew slightly by 2.9 per cent, indicating continued foreign investor confidence in the Bangladeshi market.
However, portfolio investment remained weak, with a slight improvement in net outflows at -$62 million, compared to -$111 million in FY23. This suggests that while some capital is returning, investors are still cautious due to global uncertainties and local economic conditions.
Md Abdullah Yousuf an economist and teacher in the University of Dhaka said Bangladesh must create a more conducive environment for foreign investments, stressing, "Reforms in the regulatory framework and political stability are essential to regain investor confidence and attract higher levels of FDI." Net aid flows saw a significant rise, from $5 billion in FY23 to $7.7 billion in FY24, highlighting the crucial role of international support in stabilizing the economy.
The BB data shows medium and long-term (MLT) loans increased by 11.2 per cent to $9.7 billion, demonstrating the government's reliance on external financing. However, MLT amortization payments rose by 15.8 per cent, indicating growing debt repayment obligations.
Bangladesh's gross official reserves saw a significant decline, standing at $24.2 billion in FY24, down from $31.2 billion in FY23. However, the decline was less sharp when calculated according to the BPM6 standard, at $21.7 billion, compared to $24.8 billion in FY23. The decline in reserves reflects pressure on foreign exchange liquidity, though months of import coverage remained above the critical threshold at 4.4 months for goods and services.
The overall balance also showed improvement, with the deficit narrowing to -$4.3 billion from -$8.2 billion in FY23, indicating some stabilization in external balances, despite ongoing challenges.
