After a prolonged spell of external imbalance fuelled by rising import costs and global economic turbulence, Bangladesh Bank data suggests Bangladesh's external sector is beginning to regain stability.
The country's current account deficit narrowed sharply in the first seven months of the ongoing fiscal year, buoyed by a strong surge in remittance inflows and a modest adjustment in the trade balance.
According to the central bank's latest figures released on Thursday, the current account deficit declined to $381 million during July-January of FY2025-26, a dramatic fall from $1.316 billion recorded in the same period of FY2024-25.
The improvement indicates easing pressure on the country's external finances after several years marked by elevated import payments and volatility in global markets. Economists say the narrowing gap reflects a combination of stronger remittance inflows, disciplined import growth and relatively stable export earnings.
Remittances from expatriate workers have emerged as the most powerful driver of the recovery. During July-January of the current fiscal year, inflows reached $19.43 billion, registering a robust 21.8 per cent increase compared with $15.96 billion in the same period a year earlier.
The surge in remittances significantly strengthened the secondary income account, which rose to $19.81 billion, up from $16.34 billion in the corresponding period of the previous fiscal year.
Economists attribute the rise partly to improved monitoring and the growing use of formal banking channels for sending money home.
Higher remittance inflows have helped offset deficits in other segments of the external account, particularly in trade and services.
Despite the overall improvement, the merchandise trade balance remained negative. The trade deficit widened to $13.8 billion during July-January FY2025-26, compared with $11.75 billion in the same period last year.
Export earnings remained largely stable. Total export receipts reached $26.09 billion, slightly below the $26.37 billion recorded a year earlier. The ready-made garments industry - the backbone of Bangladesh's export sector - generated $23.27 billion, accounting for the vast majority of export income.
Imports, meanwhile, continued to rise moderately. Import payments climbed to $39.89 billion, marking a 4.6 per cent increase compared with the previous year.
Economists say the higher import bill reflects increased purchases of industrial raw materials, capital machinery and energy supplies needed to sustain domestic production and economic activity.
The services account also remained under pressure. The deficit widened slightly to $3.44 billion, as service payments reached $7.47 billion, significantly exceeding receipts of $4.03 billion.
Similarly, the primary income account recorded a deficit of $2.95 billion, largely due to profit repatriation by foreign investors and interest payments on external debt. Official interest payments alone amounted to $1.33 billion, highlighting the growing cost of servicing foreign borrowings.
Despite the current account shortfall, Bangladesh's overall balance of payments position improved thanks to stronger inflows through the financial account. The financial account registered a surplus of around $2.0 billion during the period.
Net foreign direct investment stood at $867 million, while trade credit and banking sector liabilities also contributed to foreign currency inflows.
As a result, the country's overall balance of payments recorded a surplus of $2.28 billion, enabling the central bank to strengthen its foreign exchange buffer.
Gross foreign exchange reserves rose to about $33.18 billion, while reserves calculated under the international BPM6 methodology stood at $28.68 billion. The current reserve level is sufficient to cover nearly five months of import payments, marking a gradual improvement from the period of acute external pressure experienced in recent years.
Economists say the latest figures suggest that Bangladesh's external sector is stabilising, largely due to the resilience of remittance inflows, steady export earnings and a measured pace of import growth.
However, they caution that sustaining this stability will depend on maintaining strong remittance flows, diversifying exports and carefully managing external borrowing amid an uncertain global economic environment.
