Export diversification for tackling trade deficit

The trade deficit in Bangladesh has widened due to lower exports and relatively higher imports from July 2025 to January 2026, reaching approximately $13.8 billion. It is a matter of great concern that the deficit stood at around $11.75 billion during the same period of the previous year.

The situation has not been further aggravated by the ongoing Israel-Iran war, which began in February 2026. However, it is clear that the balance of payments and trade balance remain under pressure due to declining exports and fluctuating import levels.

Although recent figures show that the current account deficit has narrowed compared to the previous year, this improvement has largely been supported by increased remittance inflows, which rose slightly during Ramadan and the Eid period. However, the growing fragility in the export sector has yet to stabilise and has not been sufficient to ease the overall economic pressures.

There is no alternative to increasing exports through proper diversification. At the same time, reducing imports is not a viable option due to the economy's heavy dependence on imported inputs for manufacturing industries. Therefore, the primary strategy must be the expansion of exports. This includes exploring new markets and reducing the cost of goods sold (COGS) to ensure sustainable profit margins.

Otherwise, the currency may face further depreciation, which would not help in addressing the underlying challenges. If necessary, policymakers should introduce targeted incentives for export-oriented industries to help them overcome the current difficulties.

Kawsik Azad Pronoy

A Banker