Bangladesh's current account balance -- a measure of the country's financial transactions with the rest of the world -- has slipped back into deficit, signalling a slightly uncomfortable situation in the external economy.

The main culprit is a widening gap in the service account, driven by rising transportation costs.

Meanwhile, the financial account, which tracks foreign investments and loans, has seen a reduced surplus due to higher short-term foreign loan repayments.

Zahid Hussain, former lead economist of the World Bank's Dhaka office, said Bangladesh's balance of payments remains fragile though there has been a sense of optimism among officials.

While exports have grown and the trade deficit has improved slightly, he sees issues in the country's ability to manage external payments, especially if import costs rise further.

According to Bangladesh Bank (BB) data, the current account deficit stood at $552 million in the July-January period of fiscal year (FY) 2024-25, compared to a $56 million surplus in July-December.

The deficit was $4.2 billion in the corresponding period of the previous fiscal year.

The balance turned negative as the service account deficit spiked during the July-January period, rising to $2.64 billion from $2.07 billion a year earlier, according to the central bank data.

In the service account, transportation costs surged to $940 million in July-January of FY25 from $514 million in the same period of the previous FY24.

The financial account surplus also shrank to $850 million in July-January from $1.18 billion in July-December. A year earlier, the surplus was just $81 million, according to BB data. 

Hussain said the decline in the financial account surplus was due to a growing short-term foreign loan deficit, which widened to $863 million in July-January from $692 million in July-December. 

Bangladesh's external balance remains fragile and is "not in a comfort zone", he said. 

"It is clear that the appeasement our policymakers are expressing about the BoP [balance of payments] is not accurate," said the economist. 

He said that there are several weak indicators in BoP, even though import payments rose just 3.3 percent in July-January of FY25. Imports of capital goods fell by 12 percent in the same period.

"If import payments increase in future, what will be the situation of the balance of payments?" Hussain asked. 

He added that the likelihood of investment rising before the election was low. 

In the BoP, export earnings stood at $26.36 billion in July-January, up 10 percent from a year earlier.

The trade deficit narrowed to $11.74 billion from $12.91 billion, according to central bank data.