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Bangladesh’s current account deficit hit an all-time high of $10 billion in just the first seven months of the ongoing fiscal year due to the escalation of trade deficit and dwindling remittances.
The large shortfall in the current account will only widen further because of the ongoing pressure on the foreign exchange reserve and exchange rate between the US dollar and taka, economists said.
The previous highest deficit in the current account was $9.56 billion in FY 2017-18, data from Bangladesh Bank showed. The deficit was $4.57 billion last fiscal year.
A current account deficit occurs when the total value of goods and services a country imports exceeds the total value of goods and services it exports.
The increasing trend of trade deficit, which stood at nearly $18.7 billion between the months of July and January in FY2021-22, are one of the main reasons for the shortfall in the current account, said Mustafizur Rahman, a distinguished fellow of the Centre for Policy Dialogue.
“Remittances have not picked up yet, which has resulted in a large current account deficit,” he added.
Between July and January, expatriate Bangladeshis sent remittances amounting to $11.94 billion, down 19.88 per cent year-on-year.
The central bank should continue to inject the dollar to keep the exchange rate with the taka stable, he said.
However, this would reduce the country’s foreign exchange reserve, Rahman said.
Ahsan H Mansur, executive director of the Policy Research Institute of Bangladesh, warned that the current account deficit may increase to $20 billion by the end of this fiscal year if the government fails to control imports.
Russia’s invasion of Ukraine will only deepen the crisis in days to come as it has already worsened the ongoing global supply chain disruption, he said.
“Depreciating the local currency against the dollar is a major tool for reducing import payments,” Mansur added.
(TDS)
