In the initial nine months of FY24, the country witnessed a surge in its financial account deficit, reaching $9.26 billion, a significant escalation from the $2.93 billion deficit recorded in the corresponding period of FY23.
Financial experts caution that such a substantial deficit could trigger immediate consequences, including currency depreciation, heightened borrowing costs, capital flight, increased foreign debt, inflationary pressures, and potential impacts on economic growth.
The financial account, a crucial component of the balance of payments, serves as a comprehensive record of a country’s financial transactions with other nations, encompassing investments, loans, changes in financial reserves, and more.
This deficit ballooned from $5.2 billion in the July–December period to its current level within a mere three months, reflecting a concerning trend.
Bankers attribute this deficit primarily to dwindling foreign direct investments (FDIs), decreased net foreign loans and grants, and a decline in foreign portfolio investments.
FDIs witnessed a 4.92% decrease to $3.2 billion in the July–March period, while foreign portfolio investments turned negative at $89 million, compared to a negative figure of $45 million in the previous fiscal year.
To alleviate the dollar crisis, Bangladesh Bank has sold nearly $32 billion to banks over the past 34 months, with significant allocations in FY24, FY23, and FY22.
Despite these challenges, Bangladesh’s foreign exchange reserves, as per International Monetary Fund guidelines, stood at $18.26 billion as of May 12. Recent interventions by the central bank, including adjustments in the interbank dollar rate, aim to stabilize the situation amidst the ongoing crisis.
Government initiatives and central bank measures to curtail imports have contributed to reducing the trade deficit, with notable progress seen in addressing the current account deficit. In July–March of FY24, the country recorded a surplus of $5.8 billion, a substantial improvement from the deficit of $3.29 billion in the same period of FY23.
Moreover, import payments in the first nine months of FY24 witnessed a notable decline of 15.42%, amounting to $45.62 billion, compared to $53.93 billion in the corresponding period of the previous year. Meanwhile, export earnings during the same period rose by 4% to $40.87 billion, reflecting resilience in the face of economic challenges.
