Bangladesh's current account deficit (CAD) narrowed significantly during the July-February period of the ongoing fiscal year, driven by higher remittance inflows and export earnings.
According to the Bangladesh Bank data, the current account deficit stood at $1.27 billion in the first eight months of FY25, a sharp decline from $4.07 billion in the same period of the previous fiscal year.
As a result, the overall balance of payments (BoP) deficit improved to $1.11 billion, down from $4.44 billion recorded during the same period of FY24.
Other key BoP components also showed positive trends.
The financial account recorded a surplus of $1.42 billion, nearly double the $654 million surplus in the same period of FY24.
Besides, the capital account surplus, which is usually relatively small, increased by 20 per cent year on year to $235 million.
Economists see narrowing current account deficit as a positive development, attributing it mainly to strong remittance inflows and export growth.
Remittance inflows surged by 22.6 per cent during the period under review, while export earnings grew by 9.1 per cent.
However, economists warn that rising foreign debt interest payments and the new US tariffs could create future challenges.
Dr Zahid Hussain, a former lead economist at the World Bank's Dhaka office, said the reduced deficit provides relief to Bangladesh's external accounts.
"The Taka's depreciation has helped both remittances and exports, which in turn contributed to narrowing the deficit," he said.
However, he cautioned that the new tariffs imposed as part of US President Donald Trump's proposed trade policy could hurt Bangladesh's exports to the American market.
"If these tariffs take effect, Bangladesh's export earnings may not continue to rise in the future," Dr Hussain said.
The US government, under a plan unveiled Wednesday night, proposed a 10 per cent baseline tariff on all imports, except for those from Canada and Mexico.
However, countries with large trade deficits with the US, including Bangladesh, face significantly higher tariff rates.
The US trade deficit with Bangladesh has led to a proposed 37 per cent tariff on Bangladeshi exports, up from the existing 15 per cent.
Other major textile exporters like Vietnam and Cambodia face even steeper tariffs of 46 per cent and 49 per cent, respectively.
Dr M Masrur Reaz, chairman and chief executive officer of Policy Exchange Bangladesh, believes these tariffs may create both risks and opportunities.
"Bangladesh could benefit if Vietnam and China see reduced exports to the US as buyers may shift orders to alternative sourcing hubs, including Bangladesh," he told The Financial Express.
While the narrowing current account deficit is encouraging, economists stress the importance of sustained export diversification to reduce reliance on specific markets.
