Bangladesh's current-account deficit shrank in the first four months of this fiscal year following a rebound in export and remittance receipts, helping a surplus balance in external finances.
The deficit in the current account stood at US$752 million in transactions between July and October, in a significant rebound from a $3.16-billion deficit recorded during the same period last year, according to data released Tuesday by the central bank.
"Export growth has recovered, and remittances have boomed," says Dr Zahid Hussain, a former lead economist at the World Bank Dhaka office, in explaining the latest macroeconomic parameters.
"As a result of these (export and remittance), the current-account deficit has shrunk significantly despite rising imports and continued deficits in the services and primary-income accounts. The external balance is improving," he adds.
Exports grew 8.3 per cent to $14.29 billion, while remittance inflows surged 30 percent to $8.96 billion during the period.
Meanwhile, import payments rose marginally by 1.0 per cent to $20.96 billion.
Financial account, another key component of the balance of payments (BoP) which had been a source of concern for policymakers, posted a surplus of $1.19 billion, driven in part by a 191-percent rise in the capital account, another component of the BoP, to $163 million.
Dr Hussain, also a key author of the recently published white paper on the state of economy, notes that trade-credit outflows, a key indicator of export-earning repatriation, had declined, reflecting an improvement in the external sector.
The most significant development is fall in the outflows on account of trade credit, suggesting better repatriation of export earnings. However, Dr Hussain raises concerns over a sharp rise in unaccounted-for outflows, which reached $2.7 billion in just four months.
"This smells of trade-based capital flight," Dr Hussain cautions.
In the meantime, the overall balance-of-payments deficit narrowed to $2.14 billion during the period, underscoring an improvement in Bangladesh's external financial position. The overall BoP deficit was $3.83 billion during the same period a year before.
Dr M. Masrur Reaz, chairman of Policy Exchange of Bangladesh, predicts that the country's external trade could benefit when Donald Trump returns to power as the US president and imposes restrictions on Chinese imports.
"The balance of payments may deliver more positive news in the future," he says on a high note of optimism about the country's trade fortune.
Despite the progress and prospect, the economists warn that structural challenges, including rising unaccounted-for capital outflows and deficits in services and primary income, could undermine the long-term stability of Bangladesh's external accounts.
jasimharoon@yahoo.con