The export sector recorded a sharp growth compared to imports in the recently concluded FY 2024-25. However, even with this strong export growth, the trade deficit did not shrink significantly. At the same time, spending in the country’s service sector has continued to rise compared to income, widening the deficit in this sector as well. These two deficits in external transactions have had an adverse impact on the country’s balance of payments (BoP).
Bangladesh Bank released the full BoP data for FY 2024–25 on August 13. It shows that in the last fiscal year, the country’s trade deficit stood at $20.39 billion. During the same period, the deficit in the service sector was $5.41 billion. However, remittances offset the deficit in these two key sources of foreign trade earnings. In the last fiscal year, expatriates sent home $30.33 billion in remittances. This record inflow brought relief to the country’s BoP, which returned to a surplus after four years.
According to the central bank data, by the end of FY 2024-25, the current account balance had a surplus of $150 million. At the same time, the financial account had a surplus of $3.98 billion. With both accounts returning to positive trajectory, Bangladesh recorded a BoP surplus of $3.39 billion.
Before this, the BoP had been in large deficit for three consecutive fiscal years following FY 2020–21. In FY 2021–22, the deficit was $6.66 billion, followed by $8.22 billion in FY 2022–23 and $4.30 billion in FY 2023–24. In total, the deficit over these three fiscal years was $19.18 billion.
When there is a BOP deficit, it has to be covered from the country’s foreign exchange reserves. To meet this shortfall, reserves that had climbed to $48 billion in August 2021 fell by half over the following three years.
Bangladesh’s economy has regained some breathing space as the balance of payments has been running in surplus, according to Bangladesh Bank’s Executive Director and Spokesperson Arief Hossain Khan. He told Bonik Barta, “The dollar shortage that lasted for the past three years has now completely eased. Traders can comfortably open import LCs as per their demand. Since the exchange rate was left to the market, the dollar rate has not gone up. In fact, at the moment, the dollar supply in the market is higher than demand. For this reason, in less than one and a half months of the current fiscal year, $640 million has been purchased from the market.”
The real picture of the country’s dollar flow and foreign trade can be found in the report titled “Balance of Payments” or BoP. According to the latest BoP report prepared by Bangladesh Bank, the country’s import expenditure in FY 2024–25 increased by 1.8 percent. In the last fiscal year, Bangladesh imported goods worth $64.35 billion. In contrast, goods worth $43.96 billion were exported during the same period. Export earnings grew by 7.7 percent. After deducting exports from imports, the country’s trade deficit stood at $20.39 billion.
The country’s export sector over the past few decades has expanded mainly on the strength of the ready-made garment industry. However, Bangladesh has not been able to boost service exports in line with goods exports. In the latest FY 2024–25, earnings from the service export sector stood at $6.73 billion. But for services, Bangladesh had to pay $12.13 billion. This means the service sector deficit in the last fiscal year was $5.41 billion. In the 2023–24 fiscal year, the deficit was $4.24 billion, in FY 2022–23 it was $4.26 billion, and in 2021–22 it was $3.95 billion. This shows that the highest service sector deficit was recorded in the last fiscal year.
Economists and experts say Bangladesh’s deficit in the services sector is likely to grow further in the coming years. The country’s education system is not producing enough skilled manpower, and young people in the information technology sector are far behind. Most technology-related services have to be imported. Bangladesh also lacks enough ocean-going vessels for international trade and aircraft for foreign travel. This growing services sector deficit, they warn, will put more pressure on the country’s economy in the future.
Commenting on the matter, Dr. Zahid Hussain, former Lead Economist at the World Bank’s Dhaka office, told Bonik Barta, “Bangladesh has plenty of opportunities to increase earnings in the services sector, but we are failing to seize them. Half of Bangladesh’s population is under the age of 26, yet we have not been able to turn this into an asset. The quality of higher education is also quite poor. Our education system is failing to prepare young people with the skills and competence to face global challenges. This is why we are unable to capitalize on opportunities to improve our position in the services sector.”
Dr. Hussain added, “Some of our young people are earning through outsourcing using the internet, but compared to neighboring India, this is negligible. India is now leading the global internet and IT market. Most of the foreign currency we earn from the services sector comes from U.N. peacekeeping missions, mainly from the salaries, allowances, and equipment rentals for our troops deployed there. At the moment, no new foreign investment is coming into the country. What is recorded as foreign investment is largely reinvestment by existing companies.”