BBN file photo

Dhaka, Bangladesh (BBN)– The country’s overall trade deficit nearly doubled in the first-half (H1) of this fiscal year (FY), 2017-18, following higher import payments against lower export receipts, officials said.

The deficit rose by more than 91 per cent or US$4.12 billion to $8.63 billion during the July-December period of FY 2017-18, from $4.51 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) 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 nearly 26 per cent to $26.31 billion during the period of FY 18, from $20.92 billion in the same period of the previous year, BB data showed.

The central banker expects that the overall trade deficit may decrease in the coming months, if the upward trend of export earnings continues.

The country’s export earnings grew by 7.78 per cent to $17.69 billion in the six months of FY 18 against $16.41 billion in the same period of the previous fiscal.

“The steady growth of export earnings continued in January that may help narrowing the overall trade deficit in the near future,” the central banker explained.

In January 2018, exports receipts stood at $3.41 billion, up 3.54 per cent over the same month in the last fiscal year. The monthly target was, however, missed by 2.55 per cent. The monthly export target was nearly $3.50 billion.

The BB data also showed that deficit in service trade also increased to $2.28 billion in the first six months of FY 18, which was $1.56 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-December period in this fiscal, despite uptrend in inward remittances.

Bangladesh’s current-account deficit widened almost eight times or by $4.76 billion in the H1 of this fiscal over the corresponding figure, as outgoings far outstripped incomings.

The current-account deficit in the July-December period marked a sharp widening from $0.54 billion in the same period of the past fiscal year, the BB data showed.

The remittance inflow, however, increased nearly 12 per cent to $6.80 billion in the first six months of FY 18 from $8.07 billion in the corresponding period.

Besides, the ongoing higher trade gap put a pressure on the exchange rate, with the Bangladesh Taka (BDT) becoming weaker against the US dollar.

The depreciating mode of BDT continues against the greenback despite of selling the US dollar by the central bank to the commercial banks to keep stable the country’s foreign exchange market.

But the exchange-rate management is mostly on the right track considering the overall economic activities of Bangladesh.

Though the country has good amount of foreign- exchange reserves, there is little scope to be complacent as pressure on import payments may go mounting further, according to the experts.

The country’s foreign exchange reserve amounted to $32.76 billion at the end of the first week of February which was $33.22 billion at the end of December 2017.

Bangladesh needs to focus on value-added export and explore the regional markets along with diversified products to increase the export earnings, they added.

Global forecast on growth and trade is positive for the current year and so Bangladesh has the opportunity to enhance exports.

They also 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, according to the experts.

However, the financial account reached a surplus of $4.66 billion during the H1 of this fiscal year, which was $2.30 billion in the same period of FY 17.

Higher inflows of medium- and long-term loans helped to maintain a robust surplus in the financial account, they added.

However, the gross inflow of foreign direct investment (FDI) increased by 0.80 per cent to $175 billion during the July-December period from $1.74 billion in the same period of FY 17, the official data showed.

Besides, net FDI inflow rose by 1.68 per cent to $1.03 billion from $1.01 billion.

However, the country’s overall balance of payments (BoP) slid to deficit of $354 million in the first six of the current fiscal year, which was surplus of $2.26 billion in the same period of FY 17.

The BoP deficit was $479 million in the July-November period of FY 18. It was $360 million in the first quarter (Q1) of the ongoing fiscal.

The central bank of Bangladesh expects that the BoP will return to a positive territory from the existing deficit level by the end of this fiscal.

The BoP surplus may reach at $393 million by the end of this fiscal against $3.17 billion in FY 17, according to the central bank’s latest projection, released on January 29 in its ongoing Monetary Policy Statement.

The BoP was surplus of $5.04 billion in the FY 16.

BBN/SSR/AD