The country's external account is showing early signs of recovery as both remittance inflows and export earnings registered notable growth in the first nine months of the current fiscal year, helping to sharply reduce the current account deficit and ease pressure on the balance of payments.
While challenges remain in financial flows and reserve management, the narrowing deficit and stronger income from abroad mark a shift towards improved stability.
The current account deficit shrank to just $659 million during July-March FY25, a dramatic improvement from $4.4 billion in the same period of FY24. The turnaround came on the back of a robust 27.6 per cent rise in remittances, which reached $21.78 billion, and a 9.5 per cent rise in total exports, led by the ready-made garments sector that delivered $30.23 billion. These gains provided critical support to the external account and injected much-needed foreign currency into the financial system, according to latest statistics of Bangladesh Bank (BB) revealed on Tuesday.
The private transfers mostly from overseas workers jumped by over $4.7 billion year-on-year. Exports also beat expectations despite global headwinds, pushing the trade gap down marginally to $15.43 billion from $15.76 billion last year.
The sustained growth in garments reflects the sector's resilience and potential to further narrow the trade deficit if supported with policy and energy stability.
Although service payments and profit repatriation costs continued to grow, dragging the services and primary income balances deeper into deficit, their impact was partially offset by the stronger secondary income flows. Interest payments rose due to maturing loans and tighter global rates, but official transfers and disciplined spending helped soften the blow.
The financial account posted a modest $1.31 billion surplus during July-March FY25, a slight dip from February's position but still higher than the same period last fiscal year. Foreign direct investment edged up to $861 million, and net aid disbursements remained positive despite a drop in new commitments. While amortization rose 37.0 per cent, the economy managed to absorb it without major liquidity strain.
Overall, the balance of payments deficit came down significantly-from $4.76 billion in July-March FY24 to just $1.07 billion this year. Bangladesh Bank's interventions to cover the gap were smaller, and gross official reserves, though slightly lower than February, held at a reasonable $20.39 billion under BPM6 standards, enough to cover nearly four months of imports.
A central bank official said, "The external sector is gradually stabilizing. Remittance and exports are showing strong trends, which are keys to reducing pressure on reserves and the exchange rate."
Prof Mustafizur Rahman, fellow of the Centre for Policy Dialogue said, "Bangladesh needs to focus on attracting more long-term investment and maintaining export competitiveness."
The BB data signals a positive shift in the external sector. With prudent macroeconomic management and focused policy support, Bangladesh can build on this momentum to restore full balance of payments stability in the coming quarters.
