The country’s financial account deficit surged to $9,258 million in July-March, the first nine months of the current financial year 2023–24, against a deficit of $2,928 million in the same period of FY23.
Financial experts highlighted that a substantial deficit in the financial account could lead to immediate impacts such as currency depreciation, higher borrowing costs, capital flights, accumulation of foreign debts and inflation, and could affect economic growth.
The financial account in the balance of payments is akin to a record of a country’s financial transactions with the other nations, detailing investments going in and out, loans being given and received, and changes in the country’s financial reserves.
The financial account recorded a deficit of $5.2 billion in the July–December period, which reached its current level in just three months.
The deficit was $2.14 billion in FY23, against a surplus of $15.45 billion in FY22.
According to bankers, the deficit was primarily driven by a decline in foreign direct investments, reduced net foreign loans and grants and a drop in foreign portfolio investments.
In July-March, the gross inflow of foreign direct investments declined by 4.92 per cent to $3.2 billion.
Bankers said that the situation was further aggravated by the fact that the repayment of existing foreign loans exceeded the influx of new loans in foreign currency from various sources.
Besides, foreign portfolio investments were $89 million negative in the July–March period, compared with those of $45 million negative in the same period of the past financial year.
Responding to a severe dollar crisis, the Bangladesh Bank sold nearly $32 billion to banks over the past 34 months.
Of this amount, $11.6 billion was allocated to banks in July-April of FY24, $13.5 billion in FY23 and $7.62 billion in FY22.
The country’s foreign exchange reserves, as per International Monetary Fund guidelines, reached $18.26 billion as of May 12.
The interbank dollar rate soared to Tk 117.5 each after the central bank raised the greenback rate by Tk 7 each on May 9.
The deficit in trade services expanded to $3,755 million in July-March of FY24, compared with that of $2,986 million in the corresponding period of the previous financial year.
However, the trade balance saw a positive shift, with the trade deficit narrowing to $4.74 billion in July–March of FY24 compared with that of $14.63 billion in the same period of the previous year due mainly to reduced imports.
Recent measures by the government and the central bank to restrict imports amid a dollar crisis have contributed to the reduction in the trade deficit, bankers said.
The country has made notable progress in addressing the current account deficit, with a surplus of $5.8 billion recorded in July-March of FY24, a significant improvement from the $3.29 billion deficit in the same period of FY23.
In the first nine months of FY24, the country’s import payments declined by 15.42 per cent to $45.62 billion compared with those of $53.93 billion in the same period of the previous year.
Bangladesh’s export earnings in July-March of FY24 rose by 4 per cent to $40.87 billion compared with those of $39.3 billion in the same period of FY23.