Trade deficit widens to $17b amid rising imports, falling exports

Bangladesh’s trade deficit widened to US$16.91 billion in the first eight months (July-February) of the current 2025-26 fiscal year, reflecting an increase of $3.2 billion compared with the same period of the previous year.

The latest Balance of Payments (BoP) data released on Thursday by Bangladesh Bank indicate that while imports have risen, a decline in exports has contributed to the growing deficit.

Remittance inflows, however, increased by nearly 21 per cent during the period, helping to cushion the overall imbalance.

According to the central bank, export earnings stood at $29.26 billion between July and February, marking a 2.6 per cent decline year-on-year.

In the corresponding period of the previous fiscal year, exports totalled $30.04 billion.

The downturn in exports began in August, the second month of the fiscal year, largely due to reduced shipments in the ready-made garments sector, the country’s leading export industry.

In contrast, imports rose by 5.6 per cent over the same period, reaching $46.17 billion, compared with $43.74 billion in the first eight months of the previous fiscal year.

Despite the widening trade gap, there has been a slight improvement in the current account balance. The deficit narrowed to $1 billion during the period, down from $1.47 billion a year earlier.

The current account typically reflects a country’s regular external transactions, including trade in goods and services as well as income flows.

A surplus indicates that no external borrowing is required to meet routine obligations, whereas a deficit necessitates financing through external borrowing.

Meanwhile, the financial account recorded a significant improvement, with a surplus of $4.08 billion during July-February of the current fiscal year, compared with just $430 million in the same period last year.

This improvement is largely attributed to higher trade credit, which stood at $2.56 billion during the period, up from $1.12 billion in the previous year.

A positive trade credit balance indicates the receipt of overdue export earnings, whereas a negative balance suggests delays in repatriation.

The financial account measures changes in ownership of international assets. A deficit in this account typically exerts pressure on foreign exchange reserves and exchange rates.

Bangladesh experienced such a deficit for the first time in over a decade at the beginning of the 2022-23 fiscal year, amid an acute dollar shortage.