Current account deficit narrows on remittances

Bangladesh's current account deficit narrowed sharply in the first seven months of the fiscal year through January, helped by robust remittance inflows that temporarily eased pressure on the country's external sector.

However, economists caution that the improvement may not last, as escalating tensions in the Middle East following a US-Israel attack on Iran could disrupt global fuel supplies and push up import costs in the coming months.

According to the latest data released by the central bank on Thursday, the current account deficit stood at US$381 million during the July-January period, down significantly from $1.3 billion recorded in the same period a year earlier.

Other components of the Balance of Payments (BoP) also showed improvement during the period.

The capital account registered a surplus of $205 million, while the financial account posted a surplus of $2.0 billion.

As a result, the country's overall balance of payments recorded a surplus of about $2.28 billion during the period under review, offering some breathing space for policymakers struggling to stabilise the foreign exchange market and reserves.

Economists say the latest figures reflect a temporary stabilisation of the external sector, largely driven by robust remittance inflows.

Dr Zahid Hussain, former lead economist at the World Bank, told the FE that the first seven months of the fiscal year showed a relatively comfortable external position.

jasimharoon@yahoo.com