Bangladesh has witnessed a dramatic change in the financial account – under the country’s balance of payments (BoP) – during the July-April period of FY24.
This account surprisingly showed a $2.23 billion positive figure, compared to $9.25 billion negative posted during the July-March period – which is only a month of difference. The negative trend of net trade credit was responsible for the July-March fall.
The net trade credit deficit had narrowed during the July-April period of FY24 because the BoP calculation is now based on the revised data of exports, instead of provisional data, in accordance with International Monetary Fund (IMF) conditions.
This is why the financial account now looks positive, according to an analysis of the BoP data published by the Bangladesh Bank on Wednesday.
In a footnote, the central bank had mentioned, “The NBR revises and provides the export shipment data to the Bangladesh Bank and Export Promotion Bureau (EPB) by adjusting multiple entries.
“The Bangladesh Bank compiles the export data (f.o.b) based on local sales, CMT (cutting, making and trimming), etc as per the BPM6.”
BoP data shows $33.67 billion in export earnings (f.o.b) during the July-April period of FY24, which was 6.8 per cent negative compared to the same period previous year. But the EPB data shows $47.47 billion export performance during the exact same period, which is 3.93 per cent higher year-on-year.
According to the BoP, export earnings have decreased by $13.8 billion, causing the net credit deficit to also decline. Net credit stood at $1.68 billion negative in the July-April period of FY24, compared to $12.24 billion negative in the July-March period of the same year.
Speaking to The Business Post, Policy Research Institute (PRI) Executive Director Ahsan H Mansur said, “The foreign currency coming to Bangladesh was not the same compared to export earnings posted by the EPB.
“So the financial account was showing the figure as trade credit. Following corrections under BoP, relevant figures have also changed. I laud the Bangladesh Bank for taking this initiative despite being late about it. This should have been done sooner.”
He added, “Export figures remained inflated for a very long time, which destroyed our perception of the sector, and impacted economic planning. It is very disappointing that no one made attempts for a very long time to fix this issue.
“I believe that the central bank has done it themselves, and not because they are under IMF’s pressure.”
Meanwhile, the current account balance is showing a large deficit due to the decrease in export figures, this balance was hugely positive even a month ago. The current account balance deficit was $5.72 billion in July-April period of FY24, compared to a positive $5.79 billion in July-March of FY24.
According to the BoP data, net foreign direct investment stood at $1.36 billion during the July-April period of FY24. On the other hand, foreign investors continue to withdraw from the capital market.
The portfolio investment was $96 million negative, however such investment by non-resident Bangladeshis (NRBs) was $79 million positive during the July-April period of FY24, compared to the same period of FY23.
Net aid inflow has increased slightly during this period, at a time when the country is facing a persistent USD shortage. Such flow was $4.41 billion during July-April period of FY24, which is 6.5 per cent higher compared to the same period of FY23.
But the foreign loan repayment growth is higher than the borrowing growth. During the July-April period of FY24, Bangladesh received $6.11 billion medium and long-term (MLT) loans, which was 10.4 per cent higher than figures posted during the same period of FY23.
Against this borrowing, the country repaid $1.69 billion during July-April period of FY24, a 21.7 per cent rise from the same period of FY23. The BoP error and omissions show $2.36 billion in July-April of FY24, which was $2.47 billion in the same period of FY23.
Experts say the indication of capital flight is hidden in these errors and emissions. Hence it should be examined on a case by case basis by the regulators.
The overall balance deficits in BoP declined by over $3 billion to $5.56 billion during the July-April period of FY24, this figure was $8.80 billion deficit in the same period of FY23.
The overall balance deficit has to be met from the reserves by the central bank. As a result, the reserves fell to $19.97 billion in July-April as per the IMF’s BPM6 method, which was $24.37 billion in the same period of FY23.
