Bangladesh’s foreign currency earnings are struggling to keep pace with the rising cost of imports, particularly fuel, as higher global energy prices and growing import bills put pressure on the country’s external sector.
The strain became clear in the first three months of the 2026-27 financial year, when the trade deficit widened to $7.47 billion as import payments grew more than twice as fast as export earnings.
Despite a 13.3 per cent increase in workers’ remittances to $8.59 billion, the current account slipped into a deficit of $1.33 billion during July-September, reversing a surplus recorded in the previous two months. The overall balance of payments (BoP) also posted a deficit of $1.16 billion, reflecting pressure from external trade and weaker financial inflows.
According to Bangladesh Bank’s latest balance of payments data, import payments on a cost, insurance and freight (CIF) basis reached $20.43 billion during the first quarter, up 15.4 per cent from $17.71 billion in the same period of the previous financial year.
Export shipments, in contrast, increased by 6.4 per cent to $13.05 billion from $12.27 billion a year earlier.
On a free-on-board (FOB) basis, merchandise imports stood at $19.33 billion, while export earnings reached $11.86 billion. This left a trade deficit of $7.48 billion, compared with $5.72 billion in the corresponding period last year.
The sharp rise in fuel import expenditure was a major contributor to the widening trade gap. Bangladesh spent $4.22 billion on crude petroleum, petroleum products and lubricants during July-September, more than double the $2.06 billion recorded in the same period of FY2025-26.
Crude petroleum imports surged by 118 per cent to $510.3 million, while imports of petroleum, oil and lubricants (POL) increased by 103.8 per cent to $3.71 billion.
Higher international fuel prices and volatility in global commodity markets increased the import bill, creating additional demand for foreign currency.
Import expenditure on intermediate goods rose by 22.7 per cent to $13.59 billion, while consumer goods imports increased by 26.4 per cent to $1.40 billion. However, capital goods imports declined by 13.6 per cent to $2.46 billion, with capital machinery imports falling by 22.5 per cent to $769.3 million.
The contrasting trends show that while overall import spending is rising significantly, investment-related imports have yet to recover at a comparable pace.
Ready-made garments continued to dominate export earnings. Garment exports increased by 6.2 per cent to $10.55 billion during the quarter. Knitwear exports grew by 7 per cent to $5.94 billion, while woven garment exports rose by 5.3 per cent to $4.60 billion.
Agricultural exports, however, declined by 13.6 per cent to $237.6 million, while frozen and live fish exports fell by 10 per cent to $112.8 million.
Current account swings into deficit
The current account balance deteriorated sharply after recording a surplus of $591 million during July-August. By the end of September, it had turned into a deficit of $1.33 billion, compared with a deficit of $821 million in the corresponding period of the previous financial year.
The deterioration came despite strong remittance growth, showing how rising import payments and other external obligations were absorbing the country’s foreign currency earnings.
The services account recorded a deficit of $1.28 billion during the quarter, while the primary income account posted a deficit of $1.30 billion.
Services payments increased by 5.2 per cent to $3.24 billion, against receipts of $1.96 billion. Primary income payments stood at $1.98 billion, substantially higher than receipts of $681.2 million.
The deficits in services and primary income added to the pressure from the widening merchandise trade gap.
Workers’ remittances remained a major source of foreign currency, reaching $8.59 billion during July-September, up 13.3 per cent from $7.59 billion in the same period last year.
Saudi Arabia was the largest source, contributing $1.65 billion, up 33.7 per cent. The United Kingdom followed with $1.22 billion, an increase of 31 per cent, while the United States contributed $774.9 million, up 23.7 per cent.
Inflows from some major labour markets declined. Remittances from the United Arab Emirates fell by 12.1 per cent to $777.4 million, while those from Malaysia dropped by 18.4 per cent to $666.7 million.
The financial account returned to a surplus of $323 million at the end of September after recording a deficit of $1.22 billion during July-August. However, the surplus was significantly lower than the $1.80 billion recorded in the corresponding quarter of the previous financial year.
Net foreign direct investment (FDI) stood at $353 million, while portfolio investment recorded a net outflow of $69 million.
Net medium- and long-term loan inflows fell by 48 per cent to $542 million from $1.04 billion a year earlier, indicating a substantial decline in this source of external financing.
The weaker financial account surplus limited the support available to offset the current account deficit.
The overall balance of payments recorded a deficit of $1.16 billion during July-September, compared with a surplus of $853 million in the same period of the previous financial year.
Bangladesh Bank Executive Director and spokesperson Arief Hossain Khan said rising fuel import costs were a major reason behind the widening trade deficit.
He said international fuel procurement costs had almost doubled compared with the previous period, putting substantial pressure on the country’s overall expenditure.
Although the situation was creating some economic pressure, he expressed optimism that it would not last long and that the external situation would gradually return to normal.
