Dhaka, Bangladesh (BBN)– Bangladesh’s overall trade deficit may cross US$13 billion by the end of the current fiscal year (FY) 2015-16, according to the central bank’s latest projection.
The deficit is expected to rise from US$10.02 billion in the just-concluded FY ‘15 to $ 13.42 billion in the FY ‘16, the Bangladesh Bank (BB) said in its latest Monetary Policy Statement (MPS), unveiled on Thursday.
The central bank of Bangladesh said the country’s current account deficit stood at $ 1.63 billion in the FY ‘15 unlike surpluses the country saw in the FYs 2013 and 2014.
“This does not signify that the external sector is gradually running into a difficult stage. The overall balance will still remain positive at $4.16 billion in the FY ’15, slightly less than $ 5.48 billion from the FY ‘14,” it added.
The current account deficit for the FY ‘16 is projected to reach $ 3.55 billion, which will eventually reduce the overall balance of payments to $ 1.13 billion from $ 4.16 billion in the FY ‘15.
“The jump in current account deficit from $1.63 billion to $3.55 billion is mainly originating from an augmenting trade deficit that is expected to rise from $10.02 billion in the FY ‘15 to $13.42 billion in the FY ‘16,” the MPS explained.
Bangladesh’s current-account balance entered the negative territory in last September due to higher imports recorded by the customs department, according to a BB senior official.
The country’s current account deficit that turned out to be less than 1.0 per cent of GDP (gross domestic product) was comfortably manageable and it did not pose any risk at the moment, the projection said.
“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,” it noted.
The BB expects 14 per cent growth in imports, 7.5 per cent growth in exports and 10 per cent growth in inward remittances for the FY ‘16.
The recent sustained increase in investment and consumption-related imports would in the near term ease the pressure of appreciation on Bangladesh Taka (BDT), enhancing its export competitiveness, the BB projected.
The central bank also said the growth rate of foreign exchange reserves would slow down and the import coverage would fall before reserves turn out to be a liability.
The foreign exchange reserves are projected to keep rising to reach $26 billion in the FY ‘16 from $ 25 billion in the FY ‘15, but the import coverage will marginally fall from 6.2 to 5.7 months.

“Around six months of import coverage are generally deemed safe and comfortable for an emerging country like Bangladesh,” the MPS observed.

BBN/SSR/AD