Bangladesh’s trade deficit widens 6% to $4.56bn in July-August

The trade deficit continues to widen as exports slow in the face of global economic headwinds

The trend that led to a record trade deficit in the last fiscal year rolled into the first two months of the current year. The trade gap widened more than 6 percent to $4.56 billion in the July-August period from a year earlier, according to data from Bangladesh Bank.

The trend was also reflected in the current account balance, which fell further into the red, from $439 million in July to $1.5 billion by the end of August.

In the fiscal year to June 30, Bangladesh saw a record current account deficit of $18 billion. Exports were below import bills throughout the year due to causes both domestic and international. This has now continued into the first two months of the current fiscal year.

According to the monthly Balance of Payments data released by Bangladesh Bank on Monday, the import bills in the July-August period stood at $12.69 billion, a 16.96 percent year-on-year increase from a year earlier. Exports also jumped by 23.91 percent year-on-year, nearing $8.14 billion. The difference between the import spending and export earnings, known as the trade deficit, was $4.56 billion.

“The many initiatives taken by Bangladesh Bank and the government have reined in imports a bit, but not enough when compared to the growth in export earnings,” said Ahsan H Mansur, executive director of the Policy Research Institute, a private think-tank. “The latest balance of payments data is not particularly assuring.”

Bangladesh usually manages to reduce the impact of the deficit through incoming remittances, money from migrant workers sending part of their earnings home to their families.

However, as the trade deficit widens, it puts additional strain on Bangladesh’s reserves of foreign currency as imports must be paid for in dollars.

“Russia’s invasion of Ukraine has led to high levels of inflation in Europe and the US. As the people of those countries are reducing their spending, Bangladesh’s garment exports are not growing too quickly. Earnings have decreased after 13 months,” Mansur said.

“As a result, there will be a trade deficit at the end of the fiscal year.”