Rising remittances provide a fillip to Bangladesh’s external accounts

Bangladesh's current account deficit narrowed sharply in the first three months of this fiscal year, driven mainly by an increasing inflow of remittances. 

From July to September in the fiscal year (FY) 2024-25, the current account deficit was $127 million, a 93 percent decrease from the same period the previous fiscal year, according to latest data from the central bank.

The current account balance reflects the net flow of money across a country's borders, capturing imports, exports, and other financial activities like remittances, investments, and foreign aid. Economists use this balance as a key indicator of a country's economic health.

The latest data indicates an easing in the pressure on the Balance of Payments (BoP), which measures a country's overall transactions with the rest of the world, Bangladesh has been facing over the past two years. 

During July-September quarter of FY25, remittances reached $8.93 billion, thanks to a 30 percent year on year growth. 

The nation's trade gap also narrowed during the three-month period. 

From July to September period this fiscal year, the trade deficit was $4.63 billion, down from $5.01 billion in the same period of FY24.

This improvement is attributed to a rise in export earnings relative to import expenditures.

Export earnings rose 5.1 percent year-on-year, to $10.56 billion in the three months of FY25.  On the other hand, import costs increased 0.9 percent to $15.19 billion in the first three months of this fiscal year from a year ago.

Another positive development in the BoP was the financial account turning positive in the first quarter of FY25. 

The financial account recorded a surplus of $560 million in the July-September period, reversing from a $1.23 billion deficit during the same period of the previous fiscal year, according to BoP data.

The financial account, a component of the BoP, records transactions with non-residents in relation to financial assets, including direct investments, portfolio investments, and reserve assets, categorised by sector.

As such, overall deficit in the BoP reduced  significantly during the first quarter.

Bangladesh had overall external imbalances dipped 49 percent year on year to $1.45 billion in the first three-month of FY25 from $2.85 billion the same period a year ago.