Bangladesh sees its current-account deficit (CAD) recoup slowly with export and remittance earnings outstripping tightfisted import spending meant to weather dollar dearth, official data showed.
The marginal surplus in the out-of-pocket spending from the nation's purse, however, fails to cushion the country's stressed foreign-exchange reserves as banks continue to feed on dollars lent by the central bank despite having almost enough in their own account, sources said.
Nor is there a feel-good situation yet with the balance of payments or BoP as the country's financial-account deficit (FAD) remains wide with lower incomings in investment and aid against higher outgoings in debt servicing and other payments, they said.
The surplus trend in export and remittance incomes basically comes because of the unofficial restrictions given on import expenses by the Bangladesh Bank (BB) amid forex dearth in the wake of looming economic recession globally following the Russia-Ukraine war, officials at BB said.
But the economy, which has been going through a crisis time because of the ongoing volatility in the global and local macroeconomic orders, cannot reap the benefits properly due to rising sale of the greenback by the BB to the commercial banks to help them clear their overseas transactions.
According to the statistics available with the country's central bank, Bangladesh spent US$ 6338.10 million (about 6.34 billion dollars) for import purposes in July 2022 while the total earnings from export and remittance came to US$ 6081.13 million. The spending was $256.10 million higher than the earnings.
The difference between the earnings and spending was negative for the following four months -- $ 731.37 million, $1747.23 million, $772.54 million and $904.17 million in August, September, October and November respectively.
But things started to make a turnaround in December 2022 when the earnings from export and remittance were over $7.06 billion while the volume of import was worth over $6.04 billion. And the economy was blessed with a surplus of $1021.99 million in earning that month.
The surplus trend continued in January with $723.61 million, February $1566.46 million, March 581.91 million, April $415.31 million and May with $76.58 million, according to the available BB data.
Seeking anonymity, a BB official says export and remittance are the two major forex-earning areas. On the other hand, import is the prime area where most of the country's earned foreign currencies are spent.
As the economy confronted crisis moment following downturn on the global macroeconomic fronts after the war in Europe broke out, the official recounts, the BB took the austerity measure from September last to buttress the falling forex reserves.
"It is now benefiting the economy. Look at the data, you will see surplus of earning from the spending since December 2022 and it continues, which gives a sigh of relief," the central banker says about a respite.
Another BB official, who also preferred not to be quoted by name, smells a rat in banks' unrelenting dollar suck from the central bank's reserves. He says the foreign-currency balance with the commercial banks keeps increasing in recent months, reaching $6.0 billion by now.
Despite the gradual increase in forex holding, the official wonders, the sale of the US dollar by BB from its reserves continues soaring, which is "unfortunate".
"That's why we're not seeing impact of the earning surplus in the reserve figure," the central banker says.
Talking to the FE, managing director and chief executive officer of Pubali Bank Limited Mohammad Ali said the forex-holding situation in the banks continued improving, which is a good sign.
"The NOP (net opening position) of my bank was $110-million negative. It is now $20-million positive," he said about the change of fortune attuned with slowly changing global economic activity.
Explaining reasons for the improvements, the top executive of the scheduled bank said the inflow of remittance was on an upturn while exporters were placing growing numbers of proceeds in recent times to pay salaries of their workers ahead of recently-observed two Eids.
Contacted for his view of the macroeconomic developments, chairman of local think-tank Policy Exchange of Bangladesh Dr M. Masrur Reaz said the BB adopted the belt-tightening measures with the squeezing of imports probably from September last year. But the banks have to clear legacy of LCs in the form of deferred settlements over the next several months.
"That's why we're seeing earning surplus from the month of December 2022," he says explaining the forex arithmetic.
The economist notes that the economy saw positive growth in earnings from exports and remittances while the import plummeted by around 26 per cent year-on-year terms in FY'23.
"And it is reflected in the u-turn of earning. But the question is how long the restriction will persist as the industrial output and employment problems severely affected the economy," Mr. Masrur asks.
"I hope the BB has done their math and would start easing the restriction gradually considering criticality and importance of the sector," he suggests.
He thinks the surplus earning helps improve the CAD but it will not improve the BoP (balance of payments) situation as the situation of financial account is not in good territory.
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