Dhaka, Bangladesh (BBN)– Bangladesh’s overall trade deficit nearly doubled in the first five months of the ongoing fiscal year (FY) due to higher import payments against lower export receipts, officials said.
The deficit rose by 96.11 per cent to US$7.61 billion during the July-November period of FY 2017-18, from $3.88 billion in the same period of the previous fiscal, according to the latest central bank statistics.
Talking to the BBN, a senior official of the Bangladesh Bank (BB), the country’s central bank, said higher import payment obligations, particularly for food grains, fuel oils and capital machinery, pushed up the overall trade deficit significantly during the period under review compared to the same period of FY 17.
The overall imports increased by more than 27 per cent to $21.97 billion during the period of FY 18, from $17.22 billion in the same period of the previous year, BB data showed.
The central banker expects that the overall trade deficit may shrink in the coming months, if the upward trend of export earnings continues.
Bangladesh’s export earnings grew by 7.65 per cent to $14.37 billion in the five months of FY 18 against $13.34 billion in the same period of the previous fiscal.
The BB data also showed that deficit in service trade also increased to $1.85 billion in the first five months of FY 18, which was $1.43 billion in the same period of the previous fiscal.
Trade in services includes tourism, financial service and insurance.
On the other hand, the higher trade deficit pushed down the current-account balance significantly during the July-November period in this fiscal, despite uptrend in inward remittances, another BB official said.
The country’s current-account deficit rose to $4.43 billion during the period under review from $683 million in the same period of the previous fiscal.
The remittance inflow, however, increased 10.06 per cent to $5.64 billion in the first five months of FY 18 from $5.12 billion in the corresponding period.
However, the financial account reached a surplus of $4.27 billion in the first five months of this fiscal year, which was $2.31 billion in the same period of FY 17 despite a decreasing trend in gross foreign direct investment (FDI).
Higher inflows of medium- and long-term loans helped to maintain a robust surplus in the financial account, they added.
The gross inflow of FDI decreased by 1.15 per cent to $1.38 billion during the July-November period from $1.40 billion in the same period of FY 17, the official data showed.
Besides, net FDI inflow rose by 1.66 per cent to $859 million from $845 million.
However, the country’s overall balance of payments (BoP) slid to deficit of $479 million in the first five months of this fiscal year, which was surplus of $1.91 billion in the same period of FY 17.
The BoP deficit was $225 million in the July-October period of FY 18. It was $360 million in the first quarter (Q1) of the ongoing fiscal.
Economists and experts suggested the authorities concerned for taking effective measures to expedite monitoring for discouraging import of unnecessary items.
“The import of less productive or luxurious items should be discouraged to ease the external pressures on the economy,” Former Director General of Bangladesh Institute of Development Studies (BIDS) Mustafa K Mujeri explained.
He also advised the authorities concerned to explore new markets across the world for boosting export of both traditional and non-traditional items.
The Centre for Policy Dialogue (CPD) has advised the government to investigate whether capital flight has taken place by way of sugar, edible oil and cotton imports.
“Despite global price stability of raw cotton and an upturn in the growth of garment exports, the high growth of over 75 percent in import payments for this item appears to be suspicious,” the CPD said in its State of the Bangladesh Economy in FY2017-18.
“There is no resemblance between export and import growth of garment and cotton,” said Mustafizur Rahman, distinguished fellow of the CPD, while unveiling the private think-tank’s latest study at an event held at CIRDAP Auditorium in Dhaka on Saturday.
He also said the apparel export growth was recorded at 7 per cent while the import growth of cotton was recorded at 75 per cent in the first four months of this fiscal year.