The country鈥檚 trade deficit declined slightly in the first seven months (July鈥揓anuary) of the current fiscal year FY2024-25 compared with the same period in the previous fiscal year, as export earnings saw a notable rise.
According to Bangladesh Bank data, the trade deficit stood at $11.74 billion in July鈥揓anuary of FY25, down from $12.91 billion in the corresponding period of FY24.
A country鈥檚 trade balance is the difference between the value of its exports and imports of goods and services over a certain period. It can be classified as trade deficit when imports exceed exports and trade surplus when exports exceed imports.
The reduction in trade deficit was mainly driven by a significant 10 per cent increase in export earnings, which reached $26.36 billion, up from $23.97 billion in the same period of FY24.
On the other hand, import payments rose by 3.3 per cent to $38.11 billion, compared with $36.9 billion in FY24.
The increase in imports offset some of the gains from exports, preventing a larger decline in the trade deficit.
Despite the reduced trade deficit, the country鈥檚 current account balance turned negative again in the July鈥揓anuary period of FY25.
The current account recorded a $552 million deficit, compared with a much larger $4.28 billion deficit in FY24.
The key reason behind this improvement was the sharp rise in remittance inflows, which strengthened the secondary income component of the balance of payments.
The primary income deficit, which includes payments made on salaries, interest, dividends, and profits from foreign investments, stood at $2.42 billion.
This resulted from the fact that income paid to foreigners ($2.82 billion) was significantly higher than income received from abroad ($402 million).
A major factor preventing the current account from deteriorating further was the sharp increase in remittance inflows.
During July鈥揓anuary of FY25, the country鈥檚 secondary income鈥攚hich includes remittances鈥攔ose to $16.26 billion, up from $13.17 billion in FY24.
Out of this, $15.96 billion came from remittances, highlighting their crucial role in supporting the economy.
The financial account, which tracks foreign investments, loans, and financial reserves, recorded a surplus of $850 million in July鈥揓anuary of FY25, up from just $81 million in FY24.
During this period, the government secured $3.66 billion in net foreign loans, slightly lower than $4.44 billion in FY24. However, loan repayments increased to $1.61 billion, compared with $1.15 billion a year earlier.
The trade in services deficit, which accounts for payments related to transport, travel, and other business services, widened to $2.64 billion in July鈥揓anuary of FY25, compared with $2.08 billion in FY24.
This indicates higher foreign exchange outflows in service-related transactions.
As of February 28, the country鈥檚 foreign exchange reserves, calculated under IMF guidelines, stood at $20.94 billion.
The interbank dollar rate surged to Tk 122 per dollar, reflecting continued pressure on the local currency.