03 External sector

Chapter 03 of 60 in the Bangladesh 2036 research base. Contents of the series.

The float did what compression could not: hold the accounts together without starving the real economy

Bangladesh's external accounts have been repaired twice in three years, once by force and once by price. The first repair was compression: import shipments were cut from 89,162.3 million USD in FY22 to 75,061.6 million USD in FY23 and 66,725.2 million USD in FY24, a fall of 15.8 percent and then 11.1 percent, 25.2 percent across the two years [BB Econ 2025], which took the current account from minus 4.0 percent of GDP in FY22 to minus 2.6 percent in FY23 and minus 1.4 percent in FY24 [IMF WEO 2026] while reserves still fell. The 2024 to 2025 repair was the exchange rate reform plus positive real interest rates, and it worked through the remittance channel: Bangladesh Bank records 30,328.80 million USD of workers' remittances in FY25, up 26.8 percent from 23,912.22 million USD in FY24, and BPM6 reserves of 26,603.7 million USD at end-September 2025, up 33.95 percent year on year [BB Econ 2025]. The thesis of this chapter is that the cushion is rebuilt but its structure is unchanged: exports are 86.6 percent ready made garments [BACI 2024], the migration flow runs two to one less skilled over skilled [BMET 2023], and the financial account rests on official flows rather than private capital. Chapter 02's graduation shock arrives at exactly the moment an import rebound retests the cushion, and the decade's external question is whether diversification replaces compression as the adjustment tool.

The record: two adjustments, one by import strangulation and one by price, with remittances underwriting both

The trade record is concentration plus compression. On the IMF balance of payments series, which is calendar year and carries the vintage that predates Bangladesh Bank's 2024 export data revision, goods exports rose from 38.68 billion USD in 2018 to 51.83 billion USD in 2022 and 52.51 billion USD in 2023 [IMF BOP 2023]. The Bangladesh Bank fiscal record is the revised basis: 52,082.7 million USD in FY22 on the old EPB count, then 46,494.6 million USD in FY23 on the National Board of Revenue's revised shipment count, 44,474.8 million USD in FY24, a fall of 4.3 percent, and 48,299.4 million USD in FY25, a recovery of 8.6 percent [BB Econ 2025]; the FY22 to FY23 step is a data break, not a collapse. The BACI calendar year record puts 2024 at 58.8 billion USD with the ready made garment share at 86.6 percent, the concentration chapter 02 dissects [BACI 2024]. Import shipments peaked at 89,162.3 million USD in FY22, were cut to 75,061.6 million USD in FY23 and 66,725.2 million USD in FY24, then rebounded to 68,354.4 million USD in FY25 [BB Econ 2025]. On that single basis the trade coverage ratio, exports over import shipments, ran 58.4 percent in FY22, 61.9 percent in FY23, 66.7 percent in FY24 and 70.7 percent in FY25 [BB Econ 2025], and the honest reading of the climb through FY24 is that the denominator fell rather than the numerator rising; only FY25 adds a rising numerator.

Remittances are the shock absorber, and they responded to the exchange rate faster than to any worker programme. The IMF secondary income record, calendar year, shows 16.24 billion USD in 2018, 22.55 billion USD in 2020 and 22.85 billion USD in 2023 [IMF BOP 2023]. Bangladesh Bank's cash record then shows the post reform step: 23,912.22 million USD in FY24 and 30,328.80 million USD in FY25, an increase of 26.8 percent, with September 2025 alone at 2,685.88 million USD and July to September 2025 up 15.95 percent on the same months of the previous fiscal year [BB Econ 2025]. The World Bank personal remittances series registers 27.52 billion USD for WDI year 2024 [WB WDI 2026]; the following year on that series could not be confirmed, because the data lake's mirrored copy of that series holds zero rows and no published World Bank total for it could be found. The WDI basis is wider than the Bank's cash count and its year convention for this series is unsettled, so the two records are read for direction, not joined. The mechanism is the rate: once the taka moved from the managed 110 toward the market rate recorded in chapter 05, the premium for moving money through informal channels collapsed and the formal channel captured the flow. It is the largest one year rise since FY21, when the pandemic shut the informal channel and remittances jumped 36.1 percent, from 18,205.01 million USD to 24,777.71 million USD [BB Econ 2025]; the difference is that the FY25 rise came from a price change and not from a border closure, and it happened without a new overseas worker programme.

The reserves record shows both the cost of defending the old regime and the rebuild since. The IMF international investment position puts reserve assets at 32.0 billion USD at end-2018, 46.2 billion USD at end-2021, then 26.3 billion USD at end-2022, 21.9 billion USD at end-2023 and 21.4 billion USD at end-2024 [IMF IIP 2024]. Bangladesh Bank's monthly BPM6 series shows the turn: 26,740.0 million USD at end-June 2025 and 26,603.7 million USD at end-September 2025, with total international reserves at 31,426.8 million USD [BB Econ 2025]. Two measures of the same stock tell different stories, the gross figure the central bank reports and the BPM6 figure the IMF measures, and the gap between them is itself a monitorable: 5,032.0 million USD at end-June 2025, 31,772.0 million USD gross against 26,740.0 million USD on BPM6 [BB Econ 2025]. Chapter 15 uses the BPM6 figure throughout for that reason. The IMF programme's floor is set on net international reserves, a narrower measure again; the floor's exact value could not be confirmed from the sources this chapter draws on, and the programme reviews would settle it.

Migration flows sit underneath remittances. Overseas employment ran at 425,684 workers in 2014, rose to 1,135,873 in 2022 and 1,305,453 in 2023, the highest in the record [BMET 2023]. The fiscal year record then turns down: 1,197,128 workers left in FY24 and 1,015,675 in FY25, a fall of 15.2 percent [BB Econ 2025]. Saudi Arabia took 497,674 of the calendar 2023 flow and the United Arab Emirates 98,422, while Malaysia's 351,683, up from 50,090 in 2022, is the sharpest corridor shift in the record [BMET 2023]. The skill mix is the exposure: 323,993 of the 2023 flow was skilled while 654,781 was less skilled [BMET 2023]. Dividing the year's formal remittances by the year's worker flow, an illustration of channel value and not a wage claim, gives roughly 19,000 USD per worker in FY23, 21,610.73 million USD over 1,137,931 departures, and roughly 29,900 USD in FY25, 30,328.80 million USD over 1,015,675 [BB Econ 2025], the arithmetic signature of formalisation rather than a doubling of wages abroad.

Debt service is the scheduled claim on the same cushion, and it is compounding faster than the flows. External debt service was 2,670.2 million USD in FY23 and 3,371.6 million USD in FY24, with the interest component at 1,349.8 million USD in FY24, up from 935.7 million USD in FY23 and 492.1 million USD in FY22, a rise of 174 percent in two years [ERD 2024]. In FY23 the bill was 12.8 percent of government revenue and 5.8 percent of exports plus remittances [ERD 2024]. Chapter 04 carries this into the budget arithmetic and chapter 02 links the graduation transition to the borrowing terms that drive the interest line.

Foreign direct investment is the leg that never arrived. The inward FDI stock was 16.87 billion USD in 2019, 20.81 billion USD in 2021, and has since gone nowhere: 17.51 billion USD in 2022, 17.37 billion USD in 2023 and 17.86 billion USD in 2024 [IMF CDIS 2024]. Against FY25 GDP of 457.9 billion USD in the IMF's estimate [IMF WEO 2026], the stock is 3.9 percent, and the balance of payments agrees with the survey: net direct investment inflows on the IMF calendar year series fell from 2,402.4 million USD in 2018 to 1,387.2 million USD in 2023 [IMF BOP 2023]. Neither the political crisis nor the reform agenda has moved it, so the financial account rests on official flows and remittances, not on private capital that has voted with its balance sheet. The investment promotion record is chapter 07's story.

The financing record, the mirror of all these flows, swung from 16.7 billion USD of net financial inflows in calendar 2022, the crisis year, to a net outflow of 3.3 billion USD in calendar 2023 on the IMF series [IMF BOP 2023]: the compression year's current account improvement was more than absorbed by trade credit and other investment leaving, which is why reserves kept falling while the trade gap closed.

Mechanism: the peg taxed remittances and subsidised imports, and the float reversed the transfer

The FY22 to FY24 crisis ran in sequence. World commodity prices and the reopening demand boom pushed import shipments to 89,162.3 million USD in FY22 [BB Econ 2025] while the managed rate held the taka at 110 per USD from December 2023 to April 2024 [BIS 2026], so the peg was subsidising imports and taxing remittances, and the parallel market premium did the adjustment the official rate refused. Reserves fell from 46.2 billion USD at end-2021 to 26.3 billion USD at end-2022 [IMF IIP 2024], the response was administrative, import restrictions and capital controls, and the 15.8 percent import cut of FY23 followed by the 11.1 percent cut of FY24 [BB Econ 2025] narrowed the current account deficit from minus 4.0 percent of GDP in FY22 to minus 1.4 percent in FY24 [IMF WEO 2026]. The cost was paid in investment inputs, capital machinery and industrial raw materials, and chapter 01's growth record shows where.

The 2024 reform changed the mechanism rather than the symptom. Bangladesh Bank replaced the 110 fix with a crawling peg on 8 May 2024, setting the crawling peg mid rate at 117.00 taka per USD [BB AR 2024], and the later move to a market determined rate is dated in chapter 05; the BIS end of month record shows 117.7 per USD in May 2024, 120.0 by August 2024, a range of 121.6 to 122.9 across 2025, and 122.75 in May 2026 [BIS 2026]. Three things followed that the compression path could not deliver. The remittance flow formalised and rose 26.8 percent in FY25 [BB Econ 2025]. The reserve decline reversed into a build of 33.95 percent year on year at end-September 2025 [BB Econ 2025]. The current account, which the IMF recorded at minus 1.4 percent of GDP in FY24, closed to 0.0 percent in FY25, a deficit of 138 million USD on Bangladesh Bank's revised count [IMF WEO 2026] [BB Econ 2026]. The float did not weaken the external position, it repriced it: the premium that used to leak through the informal channel now flows through the banking system.

The import composition tells you why the compression was so costly. A 66,725.2 million USD import bill [BB Econ 2025] is mostly energy, capital machinery, industrial raw materials, cotton for the garment sector and the intermediate goods of the export sector itself, so cutting it by a quarter in two years does not mainly cut consumption, it cuts the input side of the next export and investment cycle. Compression is a financing trick rather than an adjustment: it produces a smaller deficit that is borrowing from future export growth, and the FY24 growth numbers in chapter 01 carry part of that bill. The unwinding is now in the data and it is orderly so far: imports grew 2.4 percent in FY25 while exports grew 8.6 percent, but in July to September 2025 imports ran 9.49 percent ahead of the previous year against export growth of 5.26 percent [BB Econ 2025]. The race between those two series is the external story of FY26.

Export target credibility has a record now, and it is poor. The FY23 goods export target was 58,000.0 million USD; actual EPB earnings were 55,558.77 million USD, a shortfall of 4.21 percent [EPB 2023], and the National Board of Revenue's later revision cut the same year to 46,494.6 million USD [BB Econ 2025], 19.8 percent under the target. On the Bank's revised basis exports fell 4.3 percent in FY24 before the 8.6 percent recovery of FY25 [BB Econ 2025]. A target regime that assumes high single digit growth has delivered a revision, minus 4.3 and 8.6 across the last three measured years, and the FY25 outturn is the first that beats the assumption; one year is a recovery, not a regime.

The fragility underneath is concentration, the same fragility chapter 02 measures for trade. Export earnings depend on one product line into two destinations, the European Union at 52.4 percent of 2024 exports and the United States at 14.8 percent [BACI 2024]. Remittance earnings are almost as concentrated: Saudi Arabia and the United Arab Emirates together took 596,096 of the 2023 worker flow, with Malaysia's 351,683 the rising new corridor [BMET 2023], and the skill mix runs two to one less skilled over skilled [BMET 2023]. A shock to any one of these legs arrives directly at the reserves.

The decade ahead: graduation reprices the debt, the float absorbs the shocks, and the export gate belongs to chapter 02

The external projections that matter are terms of trade and terms of borrowing. The IMF projects the current account deficit at minus 0.6 percent of GDP in FY26 and minus 1.2 percent in FY27 [IMF WEO 2026], a financed normal range rather than a crisis range; Bangladesh Bank's provisional FY26 count already shows a deficit of 1,594 million USD [BB Econ 2026]. The IMF and World Bank assessments of 2025 project that the financing mix shifts away from concessional terms as graduation proceeds [IMF Art IV 2025] [WB BDU 2025], stacking cost onto the 3,371.6 million USD service bill of FY24 [ERD 2024]; the basis point estimates differ by institution and could not be confirmed from the sources this chapter draws on. The remittance path the reform scenario assumes is a plateau near the FY25 level of 30,328.80 million USD [BB Econ 2025, table XVIII] with composition shifting toward skilled corridors, while the stall scenario assumes Gulf labour demand softens with oil revenue and the flow erodes from a base higher than the pessimists allowed for.

The export arithmetic gates the account. The FY25 pair, exports up 8.6 percent against imports up 2.4 percent [BB Econ 2025], was the first year since FY19 in which exports outgrew imports with both rising and without administrative help, and holding that relationship through the graduation shock is the external condition that chapter 02's decisions must satisfy. At the FY25 import bill of 68,354.4 million USD [BB Econ 2025], exports that grow slower than imports reopen a trade gap that remittances and reserves must finance.

The decision points. The diversification decision belongs to chapter 02 and gates this chapter's decade. The migration governance decision, whether recruitment cost and wage protection systems are enforced in the Gulf and Malaysia corridors, decides whether the remittance cushion grows with quality jobs or vulnerable ones; chapter 08 carries the labour side. The reserve management decision, how much buffer is enough once the IMF programme ends, is the one the next government owns alone. The FDI decision, whether energy contracting, customs predictability and the exchange rate regime finally make the 17.86 billion USD stock [IMF CDIS 2024] grow, is the difference between an external account financed by debt and one financed by equity.

Risks print in monthly series and the upside is a channel, not a new engine

Risks. First, a remittance reversal: a Gulf labour shock or a wage protection failure would hit the cushion that now finances the current account; the revealing indicator is the monthly series, 2,685.88 million USD in September 2025 against a FY25 monthly average of 2,527.4 million USD [BB Econ 2025], and a quarter running below 2,400 million USD a month would be the signal. Second, an import rebound: July to September 2025 import growth of 9.49 percent against export growth of 5.26 percent [BB Econ 2025] is the FY23 compression unwinding in reverse, and if it persists while exports stall, the FY26 current account carries the gap. Third, a graduation terms shock: costlier external borrowing stacked on an interest bill that rose 174 percent in two years to 1,349.8 million USD in FY24 [ERD 2024]; the revealing indicator is the ERD average interest rate on new commitments.

Upside. First, the formalisation dividend is not exhausted: the per worker channel value moved from roughly 19,000 USD in FY23 to roughly 29,900 USD in FY25 [BB Econ 2025], and digital onboarding in chapter 13 can carry it further toward the wages migrants actually earn. Second, the float is a real regime: with a two sided market, external shocks are absorbed by the rate instead of the reserves, which is why the 26,603.7 million USD BPM6 level of September 2025 [BB Econ 2025] is more defensible than a similar level bought with controls in FY21. Third, export adjacency: the complexity gains chapter 02's threshold targets would do for the balance of payments what garments did in the 1990s, and chapter 01's domestic savings record can fund it without new external debt.

What to watch: six indicators that separate normal management from crisis management

1. Remittances, Bangladesh Bank fiscal year basis. Current value 30,328.80 million USD in FY25 [BB Econ 2025, table XVIII], against 27.52 billion USD on the World Bank series for WDI year 2024 [WB WDI 2026]. Threshold: a fiscal year below 28,000 million USD, or a quarter running under 2,400 million USD a month, signals the cushion eroding; a fiscal year above 35,000 million USD confirms the formalisation regime. Both legs of any comparison must sit on the Bank's fiscal basis, since the World Bank year convention for this series does not reproduce it.
2. Reserves, BPM6. Current value 26,603.7 million USD at end-September 2025 [BB Econ 2025]. Threshold: a sustained build above 28,000 million USD signals the programme ended safely; a fall below 18,000 million USD signals a renewed defence.
3. Current account. Current value 0.0 percent of GDP in FY25, with minus 0.6 percent projected for FY26 by the IMF [IMF WEO 2026] and a provisional FY26 deficit of 1,594 million USD on Bangladesh Bank's count [BB Econ 2026]. Threshold: a deficit past minus 3 percent of GDP with falling reserves is the FY22 mechanism returning.
4. Trade coverage. Current value 70.7 percent in FY25, exports of 48,299.4 million USD over import shipments of 68,354.4 million USD [BB Econ 2025]. Threshold: a fall back below 65 percent driven by import growth is the compression unwinding in reverse; a rise past 85 percent driven by exports is chapter 02's diversification arriving. The FY23 and FY24 readings of 61.9 and 66.7 percent were the compressed denominator, not a strong numerator [BB Econ 2025].
5. Overseas employment. Current value 1,015,675 workers in FY25, down 15.2 percent from 1,197,128 in FY24 [BB Econ 2025]. Threshold: a skilled share above 40 percent signals wage upgrading; an annual flow below 800,000 signals a labour demand shock in the Gulf.
6. FDI stock. Current value 17.86 billion USD at end-2024 [IMF CDIS 2024]. Threshold: two consecutive years of stock growth above 10 percent signals the equity financed external account; a third flat year below 20 billion USD confirms the debt financed path.

A note on the set: five of the six print at least quarterly and the sixth, the FDI stock, annually; none requires a new statistical programme to watch; and together they answer the only external question of the decade, whether the balance of payments has moved from crisis management to normal management.

Sources used

[IMF BOP 2023] IMF Balance of Payments statistics, BPM6 presentation, calendar year, vintage predating Bangladesh Bank's 2024 export data revision, via bdpolicy.db, series: imf_bop_goods_exports_usd_mn, imf_bop_secondary_income_remittances_usd_mn, imf_bop_financial_account_balance, imf_bop_foreign_direct_investment. [IMF IIP 2024] IMF International Investment Position via bdpolicy.db, series: imf_iip_reserve_assets_total_usd_m. [IMF CDIS 2024] IMF Coordinated Direct Investment Survey via bdpolicy.db, series: imf_cdis_inward_fdi_stock_usd. [IMF WEO 2026] IMF World Economic Outlook, datamapper series BCA_NGDPD and NGDPD for Bangladesh, fiscal years ending June, accessed 2026-09-06. [WB WDI 2026] World Bank indicator snapshot updated 2026-09-04 via bdpolicy.db, personal remittances received BX.TRF.PWKR.CD.DT via the hdx/wb_combined mirror; the bdpolicy.db series wb_remittance_inflows holds zero rows and is not used. [BACI 2024] CEPII bilateral trade at HS6 via TradeWeave parquet, series: bd_hs6_trade, bd_bilateral. [BIS 2026] Bank for International Settlements USD/BDT series via bdpolicy.db, series: bis_usd_bdt_monthly_eop. [BB AR 2024] Bangladesh Bank Annual Report 2023-24, exchange rate section and FEPD circular of 8 May 2024: crawling peg mid rate 117.00 taka per USD, via ocr_text/bb/annual_report/ar2023-2024.txt. [BB Econ 2025] Bangladesh Bank Monthly Economic Trends, October 2025, tables IB and XVIII: exports f.o.b., imports on a shipment basis, foreign exchange reserves on BPM6 and total international reserves, workers' remittances and persons left for overseas employment. [BB Econ 2026] Bangladesh Bank, balance of payments monthly data page, FY25 revised and FY26 provisional current account balance, accessed 2026-09-06. [BMET 2023] Bureau of Manpower, Employment and Training overseas employment series via bdpolicy.db, series: bmet_overseas_employment_total, bmet_overseas_employment_skilled, bmet_overseas_employment_less_skilled, bmet_workers_ksa, bmet_workers_uae, bmet_workers_malaysia. [ERD 2024] Economic Relations Division debt service series via bdpolicy.db, series: erd_debt_service_total_usd_mn, erd_debt_service_interest_usd_mn, erd_debt_service_revenue_pct, erd_debt_service_export_remittance_pct. [EPB 2023] Export Promotion Bureau Annual Report 2022-23, achievement of export target in the goods sector. [IMF Art IV 2025] IMF Article IV staff assessment, Bangladesh, external financing mix direction. [WB BDU 2025] World Bank Bangladesh Development Update, external financing outlook.

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Verified line by line against primary sources: 79 claims checked, 10 corrected.

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