Deficits Appear Unusual, Inconsistent
No Trace of Tk 8 Trillion from Current Account at Bangladesh Bank
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During the final eight years of the Awami League government, an abnormal deficit surfaced in balance of payment of the current account. e country’s foreign sector income and expenditure accounts. Between 2016 and 2024, this gap amounted to nearly Tk 8 trillion, or about 63.23 billion US dollars. Massive capital flight from the country, mismanagement of foreign currency, and financial irregularities are identified as the main reasons behind this situation. These startling findings have been revealed in a report by the Finance Division itself.
According to the Finance Division’s observations, although dollar earnings from exports and remittances increased, that foreign currency did not remain sustainably within the economy. In other words, more foreign currency flowed out of the country—through both formal and informal channels—for imports, interest payments, and profit repatriation than the dollars earned from exports, remittances, and the services sector.
The components included in foreign sector income and expenditure calculations are imports, exports, remittances, services, and primary income. This overall balance is known as the current account.
Investigations show that similar situations in several countries around the world have led to major economic crises. Sri Lanka is a notable example. The country had been under pressure for several years due to large current account deficits and heavy external debt. As reserves declined, imports spiraled out of control, eventually leading to severe fuel and food shortages and pushing the government toward bankruptcy. Pakistan has also long struggled with current account deficits, dependence on foreign debt, and weak remittance management, forcing it to accept strict conditions from the IMF. Bangladesh has not yet faced such a severe situation, mainly because its export sector remains functional and remittance inflows are still significant. However, economists warn that without caution, Bangladesh could face risks similar to those countries.
Meanwhile, persistent current account deficits over several years have first impacted the value of the currency. In Bangladesh, the depreciation of the taka has accelerated in recent years, with the exchange rate rising from Tk 79 to Tk 122 per US dollar. The higher dollar price has increased import costs and fueled sharp inflation in fuel and food prices. During this period, inflation rose by nearly 91 percent. As a result, the central bank had to sell dollars in the market, reducing foreign exchange reserves and putting them under increasing pressure.
Amir Khasru Mahmud Chowdhury has taken charge as finance minister, becoming the key figure in managing the country’s financial sector. Before him, Dr. Salehuddin Ahmed completed his tenure as finance adviser of the interim government. Notably, the former adviser himself identified capital flight and mismanagement in the financial sector as major reasons behind the large current account deficit. Before leaving office at the end of his term, he left a confidential document for the current finance minister, outlining how capital flight and financial sector mismanagement had contributed to the current account deficit accumulated over the past eight years.
An analysis of the document shows that a current account deficit of 63.23 billion US dollars was recorded between the 2016–17 and 2023–24 fiscal years. The deficit was highest in the 2021–22 fiscal year, amounting to 18.70 billion dollars.
The second-highest deficit occurred in 2022–23 at 11.60 billion dollars, followed by 9.56 billion dollars in 2017–18. In 2018–19, the deficit was slightly over 5 billion dollars, while it remained below 5 billion dollars in both 2019–20 and 2020–21. In 2016–17, the deficit stood at 2.10 billion dollars. A change in power took place on August 5, 2024. In the fiscal year immediately before the interim government took office (2023–24), the current account deficit was 6.6 billion dollars.
In recent years, the issue of money laundering from Bangladesh has surfaced in various research studies and reports by international organizations. However, no government report had previously mentioned money laundering in such specific terms. Those concerned view the government’s acknowledgment of capital flight and financial sector mismanagement as the underlying causes of the large dollar shortfall as a bold step.
Former interim government finance adviser Dr. Salehuddin Ahmed said that many people had taken large amounts of foreign currency to countries such as Malaysia, Singapore, and Dubai and kept the money there. According to him, during the period in question, the dollar exchange rate was artificially controlled. This disrupted the natural balance of the foreign exchange market and further widened the current account deficit. He noted that the trade balance is usually negative, but remittances from expatriate workers help offset much of that gap. In reality, however, a significant portion of remittances entered the country through informal or illegal channels. As a result, capital flight, illegal fund transfers, weak financial management, and abnormal control over the dollar exchange rate together created this deficit.
A senior official of the Finance Division involved in the process said the biggest concern is that this crisis has emerged at a time when the country’s financial sector itself is already in a fragile condition. Non-performing loans have increased, banks are facing growing capital shortfalls, and international organizations have expressed concern about the lack of good governance in the financial sector. As a result, the current account deficit is not just a foreign sector issue; it is increasing the overall vulnerability of the economy.
According to the Finance Division’s assessment, capital flight abroad is a major reason behind the large current account deficit. One of the main channels for money laundering out of the country is through imports and exports. An analysis of government documents shows that during the eight years from 2016 to 2024, export earnings totaled 327.35 billion US dollars, while 517.12 billion dollars were spent in the name of imports. This indicates excess imports of nearly 100 billion dollars.
Economist Mustafa K. Mujeri told Agamir Somoy that a large and persistent current account deficit creates several major risks for the economy. First, it weakens the country’s ability to repay external debt, as declining export earnings and reserves make loan repayments more costly for the government. Second, it undermines investor confidence. Foreign investors fear that a dollar shortage could make it difficult to repatriate profits in the future. Third, it increases liquidity pressure in the banking sector. Importers find it harder to open letters of credit, industrial production is disrupted, and economic growth slows down.
