Financial account surplus tapering off for less intake

Bangladesh's financial-account surplus was tapering off while the deficit in current account widening until the last part of the just-past fiscal year, indicating some macroeconomic imbalances.
The stresses on the two accounts related to external incomings and outgoings during 11 months of the fiscal year 2023-24 impacted the country's balance-of- payments (BoP) situation.
The financial-account surplus in July-May period amounted to US$2.08 billion in approximately 10-percent fall from the previous month or more than 62-percent decrease from the same period a year before, according to Bangladesh Bank (BB) data.
Financial account records all transactions associated with changes of ownership in foreign financial assets and liabilities. The account mainly considers direct investment, portfolio investment and reserve assets.
In the meantime, Bangladesh's current-account deficit rose to $5.982 billion in a nearly $100-million increase in the period under review from the July-April period.
The current account represents a country's imports and exports of goods and services, payments made to foreign investors, and transfers such as foreign aid.
The trade balance, a sub-component of the current account, was recorded $20.2 billion during the period--down nearly 23 per cent year on year.
Export earnings dropped nearly 6.0 per cent to $37.3 billion during the July-May period.
On the other hand, the import payments recorded 12.6-percent down to $57.6 billion during the period under review.
Economists say the current-account deficit worsening to some extent is not bad as it is now much better than last year's when it was more than $12.0-billion negative.
They, however, suggest that the financial-account surplus should be much wider or bigger as it was more than $5.5 billion in surplus during the same period a year earlier.
Dr Ahsan H. Mansur, executive director of the Policy Research Institute of Bangladesh or PRI, told the FE that the current account worsening to some extent is not a matter of concern.
"Rather," he notes, "the downtrend in many components of financial accounts remains a concern."
The portfolio investment under the financial account recorded deficit of $111 million during 11 months of the last fiscal year.
The other components, for example, "net aid flow" and "trade deficit", also deteriorated during the period.
Dr Mansur, however, stresses the need for strengthening the financial account as an adequate surplus of the financial account will help build the reserves up.
Dr Zahid Hussain, a former lead economist at the World Bank's Dhaka office, says Bangladesh received a good amount of foreign aid recently, and that is why the financial account shows a surplus.
"However, there is pressure on the country's external account as reflected in the current account."
However, the overall BoP deficit improved to $5.88 billion during the period as it was more than $8.804 billion during the same period a year earlier.

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