Record $2.14b deficit in BD’s financial account in FY23
Staff Reporter :
Bangladesh’s financial account deficit witnessed a record deficit in the just concluded financial year of 2022-23indicating that the ongoing instability in the foreign exchange market will continue further.
The financial account saw a deficit of $2.14 billion between the July to June of FY23 in contrast to a surplus of $15.46 billion in FY22, according to the recent data from the Bangladesh Bank (BB).
Historically, the country’s financial account has witnessed a surplus almost every year.
According to experts, the financial account deficit occurs when residents of a country invest in foreign countries more than what the foreign investors invest in that country, or when the country borrows from foreign lenders more than what it lends to the foreign borrowers.
It consists of financial assets, including foreign direct investment, portfolio investment and others, between countries.
According to data from the World Bank (WB), the financial account of Bangladesh was leftover by $944 million in FY16, $4.25 billion in FY17, $9.01 billion in FY18, $5.13 billion in FY19, $7.54 billion in FY20, $14.07 billion in FY21, and in FY22 the amount of surplus was $13.67 billion.
However, country’s Foreign Direct Investment (Gross inflow) was decreased by 2.87 percent Y-O-Y in FY23 to $4.5 billion which was $4.64 billion in FY22.
Apart from this, Net Aid Flows also reduced from $8.28 billion to $6.94 billion in the just ended fiscal year of FY23.
Masrur Reaz, chairman and founder of Policy Exchange Bangladesh, said that that Bangladesh’s financial account had recently been adversely affected by sluggish foreign direct investments and net foreign loans and grants.
The reason behind the negative account might be due to foreign lenders and investors lacking confidence in Bangladesh’s economy amid the ongoing economic woes.
Ahsan H Mansur, executive director of the Policy Research Institute of Bangladesh, says that the large deficit in the financial account means the country is facing a shortage of US dollars.
Meanwhile, country’s foreign exchange reserves stood at $23.45 billion according to the BPM6 (Balance of Payments and International Investment Position) method in July 23 while the reserve (Gross) was $39.59 billion in July of the previous year.
Mustafizur Rahman, a distinguished fellow at the Centre for Policy Dialogue, said regarding the financial account deficit, “The government should emphasize implementing foreign-funded projects so that it can mobilize foreign loans in an efficient manner. If we can secure foreign loans, the deficit in the financial account will narrow.”
