Instability in the Middle East has added to pressure on Bangladesh's already strained economy, raising concerns over foreign exchange reserves and the stability of the dollar exchange rate.
Export earnings rose 7% to $11.85 billion in the first three months of the current fiscal year, while import payments increased 15% to $19.33 billion. As a result, the country's trade deficit reached $7.48 billion.
Higher fuel import costs were a major factor behind the increase in overall imports. Bangladesh spent $4.22 billion on fuel imports between July and September of the current fiscal year, double the amount recorded during the same period a year earlier.
Dr Mahfuz Kabir, research director at the Bangladesh Institute of International and Strategic Studies (BIISS), identified two main reasons for the higher import bill: rising fuel prices and increased shipping and insurance costs.
“Our import expenditure has increased for two reasons. First, fuel prices have gone up. Second, shipping and insurance costs for transporting fuel have also risen. We are importing somewhat more fuel while paying higher prices for it, which has increased our expenditure in this sector,” he said.
Remittances from expatriate Bangladeshis help offset the trade deficit. The country received $8.59 billion in remittances between July and September, but the inflow was insufficient to cover the deficit.
During the same three-month period, Bangladesh also saw a decline in net foreign assistance and new loan disbursements. Consequently, the overall balance of payments recorded a deficit of $1.16 billion, which was covered using foreign exchange reserves.
The resulting pressure on reserves has coincided with a rise in the dollar exchange rate, which has now reached Tk124.34.
Kabir said the taka had strengthened against the dollar for a period, but the situation had since changed. In the open market, buyers now have to pay Tk128 to Tk129 for each dollar, indicating a shortage of dollars in the market, he said.
He noted that export earnings had remained relatively stable, while remittance inflows had shown some signs of weakening.
“We had repeatedly seen record remittance inflows before. But instability in the Middle East and the ongoing war situation there, which has not yet ended, have caused remittances to decline somewhat,” he said.
According to Bangladesh Bank data, foreign exchange reserves stood at $31.19 billion at the end of September, enough to cover five months of imports. However, reserves fell further to $29.98 billion on November 5.
