Current account gap to go in two years

The government expects that the country’s current-account deficit will go within the next two years after remaining in negative territory for most of the past decade or so.
However, economists differ with the prediction made by the Ministry of Finance.
“...in the medium term, the BOP (balance of payments) situation will improve further, and the current-account balance would return to a positive quadrant by the end of FY 2025-26,” the Medium-Term Macroeconomic Policy Statement (MTMPS) released on June 01 said.
The current account tracks a country’s international transactions in goods, services, income and transfers, according to Investopedia. The current account affects the balance of payments, which records all economic transactions with the rest of the world. Together, they provide insights into a country’s economic relationship with other nations.

By FY26, the MTMPS mentioned that export earnings may reach US$ 78 billion and imports may stand at US$ 101 billion.
The gross foreign exchange reserves may then reach US$ 48 billion from the present amount of less than US$ 30 billion, it added.
Bangladesh Bank data shows that during the July-April period of the current fiscal year, the current account deficit was US$ 3.772 billion, while the gap was US$ 15.486 billion in the same period of the last fiscal year. In the entire fiscal year 2021-22, the deficit was $18.697 billion.
The MTMPS noted it has been more than a year since the Russia-Ukraine conflict broke out and still there is no sign that the conflict will subside soon.
The fighting in Ukraine is expected to intensify during the next few months, and if it turns out to be a larger conflict involving other countries, the world economy will most likely enter an unprecedented perilous phase, it said.
“Bangladesh is already tackling pressure emanating from the BOP situation. The measures that are being undertaken to improve the situation will be (the) key and hence will need to be implemented carefully,” notes the MTMPS.
If the current negative growth of imports continues and export growth remains stable, the BOP problem will eventually fade away. “To expedite the recovery phase, inward remittance
and disbursement of foreign loans against projects and budget support will also need to be facilitated,” it said.
Contacted, DrDebapriya Bhattacharya, a distinguished fellow at the Centre for Policy Dialogue (CPD), differed with the assumption and said the government’s Medium-Term Macroeconomic Frame-work is “fundamentally flawed”.
“The way the growth and investment figures were harmonised compared with import, tax, and current account figures is fundamentally flawed,” he said.
“It has nothing to do with reality,” Mr Bhattacharya said.
He found a similarity between the macroeconomic framework of the 8th Five-Year Plan and the medium-term macroeconomic framework in terms of imperfection.
“These are speculative numbers, have no basis in reality,” he said.
syful-islam@outlook.com