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© 2022 PressXpress All Right Reserved.
Economy

What’s Behind Bangladesh’s Surprising Economic Performance in 2023?

by Press Xpress February 15, 2024
written by Press Xpress February 15, 2024
What’s Behind Bangladesh’s Surprising Economic Performance in 2023?
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Key highlights:

  • During the July-December period of the fiscal year 2022-23, the trade deficit was $1.231 billion.
  • Foreign direct investment (FDI) in the country has decreased, from $25.2 billion in the July-December period of the fiscal year 2022-23 to $18.1 billion during the same period of the current fiscal year, marking a 27.35% decrease.
  • By the end of December 2023, Bangladesh faced a deficit of $539 million in its economic accounts.
  • According to the central bank’s data, in the first six months of the current fiscal year, remittances have increased by 2.91% or $30.5 million compared to the same period of the previous fiscal year.

In recent years, Bangladesh has faced a severe shortage of foreign currency, mainly due to the global pandemic and the depreciation of the local currency against the US dollar. To cope with this situation, the Bangladesh Bank, the central bank of the country, has imposed strict controls on imports, limiting the outflow of dollars and reducing the country’s trade deficit.

In the current fiscal year from July to December, Bangladesh’s trade deficit stood at $45.9 billion, marking a 62.67% decrease compared to the same period of the previous fiscal year. Specifically, during the July-December period of the fiscal year 2022-23, the trade deficit was $1.231 billion.

Consequently, there has been a decrease of $772 billion in trade deficit during the fiscal year. Moreover, during the current fiscal year of 2023-24 from July to November, the deficit amounted to $476 billion, indicating a $17 billion decrease compared to November.

Bangladesh Trade Deficit Analysis (July-December 2023)

Trade Deficit Comparison:

  1. Fiscal Year 2022-23 (July-December): $1.231 billion
  2. Fiscal Year 2023-24 (July-December): $45.9 billion
  3. Decrease in FY 2023-24: 62.67%

Decrease in Trade Deficit:

  • FY 2023-24 (July-November): $476 billion
  • Decrease compared to November: $17 billion
  • Total decrease during FY: $772 billion

Surplus Soars, FDI Dips, Deficit Declines

Bangladesh is a developing country that relies heavily on imports for its economic growth. The latest information published by the Bangladesh Bank on foreign transactions shows that Bangladesh exported goods and services worth $2.598 billion in the first half of the fiscal year, while imports amounted to $3.58 billion, contributing to a decreasing trade deficit, valued at 110 taka per dollar, totaling 490 crore taka.

The onset of the dollar crisis in 2022 prompted the Bangladesh Bank to impose stricter controls on imports, resulting in a decrease in the rate of opening Letter of Credit (LCs) and making it easier to address the crisis.

It is believed that if this trend continues, the trade deficit will significantly decrease. According to Bangladesh Bank’s information, there is no deficit during the ongoing fiscal year; on the contrary, there is a surplus of $192 billion in indicative terms, unlike the deficit observed during the same period of the previous fiscal year, which was $492 billion.

Having a surplus in the indicative accounts indicates that the country is not borrowing for regular transactions, which is advantageous as deficits need to be fulfilled through loans.

Conversely, foreign direct investment (FDI) in the country has decreased, from $25.2 billion in the July-December period of the fiscal year 2022-23 to $18.1 billion during the same period of the current fiscal year, marking a 27.35% decrease. Additionally, net foreign investment has decreased by 15.5% compared to the previous year, amounting to $75 billion during the discussed time, while it was $89 billion during the same period of the previous fiscal year.

Bangladesh Foreign Transactions Analysis

First Half Fiscal Year 2023-24:

  1. Exports: $2.598 billion
  2. Imports: $3.58 billion
  3. Trade deficit: $110 taka per dollar (490 crore taka)

Surplus in Fiscal Year 2023-24:

  1. Indicative surplus: $192 billion
  2. Contrasted with previous fiscal year deficit: $492 billion

Foreign Direct Investment (FDI) Trends:

  1. July-December FY 2022-23: $25.2 billion
  2. July-December FY 2023-24: $18.1 billion
  3. Decrease: 27.35%

Net Foreign Investment Trends:

  1. FY 2022-23: $89 billion
  2. FY 2023-24: $75 billion
  3. Decrease: 15.5%

Bangladesh Turned Its Economic Deficit into a Surplus in Six Months

By the end of December 2023, Bangladesh faced a deficit of $539 million in its economic accounts. At the end of the first six months of the previous fiscal year, the surplus was $140.4 million. Though lagging behind on a point-to-point basis, the deficit has started to decrease. In November, where the deficit was $547 million, in December, the economic deficit decreased by $80 million.

During this time, there has also been a slight decrease in the overall balance. According to the information from the central bank, a deficit of $367 million has been observed in this account from July to December. At the end of December 2022, the deficit was $64.5 billion. In one year, there has been a decrease of $27.8 million, or 43% in the overall balance deficit.

According to the central bank’s data, in the first six months of the current fiscal year, remittances have increased by 2.91% or $30.5 million compared to the same period of the previous fiscal year. Remittances to the country during July-December amounted to $790 million, whereas during the same period of the previous fiscal year 2022-23, it was $490 million.

According to the central bank’s data, foreign loans amounting to $95.1 million have been repaid in the past six months, whereas during the same period of the previous fiscal year 2022-23, the amount was $79.2 million. This time, foreign debt repayment has increased by more than 20% or $15.9 million.

Bangladesh Economic Accounts Overview (December 2023)

Economic Deficit:

  1. End of December 2023: $539 million deficit
  2. End of first six months previous fiscal year: $140.4 million surplus
  3. Decrease in deficit from November to December: $80 million

Overall Balance:

  1. July-December 2023 deficit: $367 million
  2. December 2022 deficit: $64.5 billion
  3. Decrease in deficit within one year: $27.8 million or 43%

Remittances:

  1. Increase in remittances: 2.91% or $30.5 million
  2. July-December 2023: $790 million
  3. July-December 2022: $490 million

Foreign Debt Repayment:

  1. Repayment in past six months: $95.1 million
  2. Previous fiscal year (same period): $79.2 million
  3. Increase in repayment: >20% or $15.9 million

In a stunning achievement, Bangladesh has turned its economy around from a deficit to a surplus in only six months. Despite dealing with serious problems of foreign currency scarcity and declining trade balance, the country implemented strategic measures under the guidance of the Bangladesh Bank, which led to a considerable reduction in the trade deficit.

By enforcing tight limits on imports and increasing exports, as well as prudent financial management, Bangladesh is now close to a surplus, showing its resilience and adaptability in the face of hardship. While there are still difficulties to face, the direction towards economic stability is evident, validating Bangladesh’s capacity to cope with challenges and emerge stronger than ever.

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