Dhaka, Bangladesh (BBN)- Bangladesh’s current account balance deficit is likely to cross US$3.50 billion by the end of this fiscal year (FY) 2015-16, according to the central bank latest projection.
The current account balance deficit may reach at $3.551 billion in FY 16 from $1.65 billion in the just concluded FY 15.
Talking to BBN, Biru Paksha Paul, chief economist at the Bangladesh Bank (BB), said such current-account deficit does not signify that the external sector is gradually running into a difficult stage. “It does not pose any immediate threat or weakness of the economy.”
Modest current-account deficits are usual, and desirable too, in growing economies, the central bank said in its latest monetary policy statement (MPS), announced on July 30 last.
It also noted that Bangladesh’s current-account deficit that turns out to be less than 1.0 per cent of GDP (gross domestic product) is comfortably manageable and that it does not pose any risk at this moment.
“Rather, it indicates the growing demand for capacity building and more productivity in the economy since more than 65 per cent of our imports comprise capital machinery, intermediate goods, and raw materials,” the MPS had explained.
The BB chief economist also said an augmenting current account deficit will turn out to a blessing in disguise for at least a year or two ahead once it comes to the exchange rate and reserves. “We’re still expecting 14 per cent growth in imports, 7.5 per cent growth in exports, and 10 per cent growth in remittances for the FY16.”
Meanwhile, higher trade deficit sent the country’s current-account balance into a negative territory again in the last fiscal after boasting surplus in the preceding two years.
The current-account deficit stood at US$1.65 billion in the FY2014-15 in a slide from a surplus amount of $1.40 billion a year before. In FY13 the surplus was as high as $2.39 billion.
Such developments, though uncomfortable, are not a matter of concern as of now. Because the overall balance recorded a surplus of $4.3 billion and an equivalent increase in foreign- exchange reserves with the BB due to a large surplus in the financial account (more than $5.0 billion), an expert explained.
Bangladesh’s overall balance of payments (BoP) came down to $4.37 billion in the last fiscal from $5.48 billion in the previous fiscal.
BBN/SSR/AD