Bangladesh’s current account deficit widened to 4.2 per cent of GDP at $18.70 billion in the financial year to June 2022, driven by a surge in commodity imports and a fall in workers’ remittances, central bank data released on Thursday showed.
Bangladesh’s $416 billion economy has been one of the fastest-growing in the world for years, but energy and food prices rising because of the Russia-Ukraine war have inflated its import bill and the current account deficit.
A fall in forex reserves in Bangladesh to below $40 billion, enough to cover only about five months of imports, has forced the South Asian government to seek a loan from the International Monetary Fund.
Foreign exchange reserves declined to $39.55 billion as of 16 August from $39.60 billion on 31 July as remittances from overseas workers fell by more than $3 billion during the financial year ending in June to $21.03 billion.
A rise in domestic demand coupled with fast recovery in the garment industry boosted Bangladeshi imports for the 12-month period ending June to $89.16 billion from about $60 billion a year earlier while exports touched $52.08 billion, data showed.
“High commodity prices, surging domestic demand, and tighter monetary conditions (are) exerting pressure on Bangladesh’s external profile,” credit rating agency S&P Global said in a separate statement earlier on Thursday.
Bangladesh’s current account deficit stood at $4.58 billion or about 1.1 per cent of GDP in the 2020/21 financial year.
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While retaining Bangladesh’s sovereign credit ratings at “BB-” for the long term and “B” for the short-term, S&P warned they could be lowered if net external debt or financial metrics worsen further.