The country's imports were rising as economic activities continued to be normal over a few months before the onset of the second wave of coronavirus.
Consequently, the surplus in the current account balance started to decrease and in March, the surplus dropped sharply on the back of imports of rice and industrial raw materials.
In the July-March period of the current fiscal year, the current account surplus has dropped to just $125 million, from $1.36 billion in the July-February period.
In February, the surplus dropped by $652 million.
According to an updated report released by the Bangladesh Bank on Thursday, during the July-March period, imports increased by 6% to $42.76 billion, compared to the same period in the last fiscal year.
The government's spending on increasing rice imports to enhance food stocks has played a role in increasing imports. In addition, imports of intermediate raw materials used in industrial production, including crude oil, have also increased significantly.
In the first nine months of the current fiscal year, the government has spent about $2 billion on rice imports, 41% up from the same period in the last fiscal year.
At the same time, consumer goods imports rose 4.39% to $2.86 billion.
Imports of cement clinker among industrial raw materials have declined.
However, crude oil imports have increased by 381% in the July-March period compared to the same period in the last fiscal year. Besides, imports of all other raw materials have also increased.
But, the investment situation in the private sector has not improved since the start of the second wave of Covid-19.
Analysing the import data of capital equipment, one of the main indicators of investment, it can be seen that during the July-March period, imports in this sector decreased by 12.76% compared to the same period of the previous fiscal year.
Ahsan H Mansur, executive director of the Policy Research Institute of Bangladesh, told The Business Standard that a $1 billion drop in surplus in one month is not a big deal considering the volume of foreign trade Bangladesh sees a year.
"This fall is rather positive for the economy. This indicates that the economy is returning to normal," Ahsan Mansur said.
"We can definitely say the economy is bouncing back because our imports are increasing," he added.
He, however, pointed out that the impact of the ongoing second wave of Covid-19 on foreign trade would be felt in July.
Meanwhile, the foreign investment situation has not improved. In the first nine months of this fiscal year, net foreign investment was $948 million, down about 8% from the same period in the last fiscal year.
Foreigners have not invested in the capital market. On the contrary, they have withdrawn $222 million from the market.
Foreign exchange reserves have also declined slightly as imports have increased despite higher inflows of remittances. During the July-February period of the current financial year, the reserves stood at $44.02 billion which has come down to $43.44 billion in the July-March period.
Bangladesh, which usually spends more on imports than it earns from exports, saw a good surplus in the current account balance after the Covid-19 pandemic brought foreign trade almost to a halt.
In the first nine months of the last fiscal year, the country had a deficit of $2.65 billion in the current account balance when there was no coronavirus and normal economic activity continued.
But since the beginning of the current fiscal year, economic activity has been hampered by the coronavirus and imports have declined. As a result, the current account balance was in surplus.
Owing to an improvement in the coronavirus situation, demand has been increasing since October last year.
Consequently, industries have increased their production resulting in an increase in imports. As this situation continued till March, the surplus in the current account balance has declined.