Bangladesh Trade Deficit Widens 24% to $23.98 Billion as Exports Fall and Capital Imports Slump

Dhaka, July 24, 2026 — Bangladesh's trade deficit has widened sharply by nearly 24 percent to $23.98 billion in the first 11 months (July–May) of fiscal year 2025-26, as exports failed to meet expectations and capital machinery imports dropped by double digits, signalling sluggish domestic manufacturing investment. The widening gap was cushioned only by a record $35.5 billion remittance surge that single-handedly kept the external sector from severe distress. 📊

📉 Data from Bangladesh Bank's Economic Indicators and Balance of Payments (BoP) reports, combined with Export Promotion Bureau (EPB) statistics, paint a challenging macroeconomic landscape for the country.

📊 The Numbers — Trade Deficit at $23.98 Billion

The gap between Bangladesh's imports and exports widened sharply during the first 11 months of FY 2025-26, according to Bangladesh Bank data.

📋 Key trade figures (July–May FY 2025-26):

• 📦 Total imports: $64.02 billion
• 📦 Total exports: $40.04 billion
• 💸 Trade deficit: $23.98 billion (up 23.73% from $19.38 billion same period last year)
• 📄 LC import settlements: $70.4 billion (only 0.09% growth from $70.3 billion previous year)
• 📄 Fresh LC openings: $74.7 billion (up 7% — hinting at potential future recovery)

🏭 Capital Machinery Imports Drop 10.68% — A Red Flag

The most concerning contraction occurred in essential production inputs. Capital machinery — the equipment factories need to expand and modernise — saw the steepest decline:

• 🔩 Industrial raw materials: Fell 3.33% to $23.18 billion
• 🏭 Capital machinery: Dropped 10.68% to just $1.80 billion

⚠️ The 10.68 percent drop in capital machinery imports is particularly alarming because it signals a sharp decline in long-term investment. Factories are not buying new equipment, which means they are not expanding capacity — a leading indicator of future export stagnation.

💸 Remittances to the Rescue — Record $35.5 Billion

While the trade deficit widened, a historic surge in foreign remittances has significantly cushioned the pressure on external transactions and played a pivotal role in boosting foreign exchange reserves. 💰

🌍 Remittance inflows hit a record $35.5 billion in FY 2025-26, providing the single largest buffer against the trade gap. Without this remittance surge, the country's current account would have been under severe pressure.

🔍 Why Is Trade Sluggish? — Five Factors

Economists attribute the subdued trade momentum in FY 2025-26 to a combination of domestic and global headwinds:

• 🌐 Global uncertainties — Geopolitical tensions, US tariff regime shifts, and slower global growth
• 📈 High interest rates — Bangladesh Bank's contractionary monetary policy has raised borrowing costs
• 🏢 Financial distress among major industrial conglomerates — Several large groups face NPL issues
• 💰 Rising production costs — Gas, electricity, and wage hikes have squeezed margins
• 😰 Deficit in business confidence — Investors are holding back on major capital commitments

📈 LC Data — Cautious Optimism for Future

While the overall picture is challenging, there are some signs of potential future recovery. Fresh LC openings increased by 7 percent to $74.7 billion, hinting that businesses may be preparing to ramp up imports in the coming months. 📅

However, business owners remain cautious regarding major capital commitments, suggesting that any recovery will be gradual rather than sharp.

⚠️ Long-Term Risk Warning

Economists warn that if export growth remains sluggish, maintaining this import burden could severely strain the external sector over the long term. The combination of:

• 📉 Falling exports
• 🔧 Stagnant capital machinery imports
• 📦 Sluggish industrial raw material imports
• 💸 Widening trade deficit

...creates a vicious cycle where declining investment leads to declining export capacity, which in turn widens the trade deficit further.

🎯 What Needs to Happen

To reverse the trend, economists and industry leaders have called for:

• 🔧 Lower interest rates for productive sectors — Make capital investment affordable again
• ⚡ Stable energy supply — Gas and electricity shortages are capping factory output
• 📊 Export diversification — Beyond RMG into pharmaceuticals, IT, jute, leather, and agro-processed goods
• 🏛️ Policy certainty — Stable tax, customs, and trade policy to restore business confidence
• 💸 Competitive exchange rate — To boost export competitiveness
• 🌍 FTAs and PTAs — Trade agreements to open new markets

For now, the record remittance inflow has bought Bangladesh time. But without structural reforms to boost exports and attract capital investment, the trade deficit will continue to widen — and remittances alone cannot sustain the external sector indefinitely. 🇧🇩