Despite a huge constraint on import payments, the country’s financial account deficit hit an all-time high of $5.39 billion in the July-November period of FY24, due to repayment pressure of foreign loans, negative growth of fresh loans, low remittance inflow, and negative FDI growth.
According to a Bangladesh Bank’s Balance of Payment (BOP) report published Thursday, the financial account deficit was $4.03 billion in July-October of FY24, which increased to $5.39 in the July-November period of the same FY.
This data indicates that the deficit increased by $1.36 billion within just November.
Speaking to The Business Post, Policy Research Institute Executive Director Ahsan H Mansur said, “The key issue is the deficit in the financial account. It is good that the current account went from a deficit to a surplus.
“But we could not achieve this through an increase in exports and remittance. We did it by restricting imports, and our economy will pay the price in the long run.”
He continued, “We now need large amounts of foreign funding. We must make an effort to reschedule short-term loans. Besides, the due payments for oil and gas imports should be converted to debt instruments, so that those can be paid off in instalments.”
Under the financial account, net foreign investment declined by 10.08 per cent to $687 million in the July-November period of FY24, compared to year on year. The negative trend of portfolio investment is still continuing, standing at negative $37 million in the same period of FY24.
The country’s net foreign aid inflow stood at $1.05 billion, which was down 37.5 per cent in the July-November period of FY24 compared year-on-year. Besides, medium and long-term (MLT) loans declined by 20.7 per cent to $1.87 billion, and repayments rose by 20.5 per cent to $823 million are same period of FY24.
Other short term loans stood at negative $1.04 billion, which means there are no fresh loans, but the amount was repaid in the July-November period of FY24.
As the government restricted imports due to USD shortage, such payments declined by around 21 per cent to $25.72 billion, export increased by 1.19 per cent to $20.96 billion, and the trade gap declined to $4.76 billion in the July-November period of FY24, compared year-on-year.
The trade gap was $11.83 billion in the same period of FY23.
During the same period of FY24, remittance growth was only 0.17 per cent and such income stood at 8.81 billion. Due to the huge drop in import payments, the country's current account balance was $579 million positive, compared to $5.66 billion negative year-on-year.
However, the hope is that the negativity of the overall balance deficit has decreased slightly to $4.89 billion during the July-November of current FY. However, this deficit was more than $6 billion in the same period of last financial year.
The deficit portion of the overall balance is taken from the forex reserves.
In other words, during November-December of FY24, $4.89 billion have been taken from the reserves. As a result, the amount of reserves fell to $19.3 billion, calculated under the IMF’s BPM6 method, during that period of current FY24.
