Bangladesh's trade gap with China narrows mainly as imports from the country's largest trade decrease amid import-tightening stance for forex constraints, sources said and cited its economic implications.
According to a Bangladesh Bank (BB) report, the country's imports in terms of letter of credit (LC) opening dropped 26.7 per cent during the fiscal year (FY2023) and about 13 per cent in terms of LC settlements.
The government has discouraged import for more than one year now to help stabilise the foreign-exchange reserves which started depleting after the outbreak of the war in Ukraine.
However, during the 2022-23 fiscal year, the trade gap with China in respect of only goods, excluding services, shrank over 1.5 per cent to US$16.83 billion. The deficit was $17.08 billion at the end of June 2022, or a year earlier, according to the BB data.
In the meantime, the country's current-account deficit with China also decreased over 2.0 per cent to $18.27 billion during the period under review.
Bangladesh imported goods worth more than $17.45 billion during the fiscal year while exported commodities worth $0.61 billion, and this leads to a net gap worth $16.83 billion with the world's second-largest economy that also stands out as vital to Bangladesh's inputs sourcing for production.
China remains number-one import destination for supplies to Bangladesh for long, replacing neighbouring India. Imports from there account for around 22 per cent of total import volume.
Bangladesh mainly imports industrial raw materials, intermediate goods, finished goods, and so.
Economists think this picture of the balance of payments (BoP) between Bangladesh and China rightly reflects the reality.
They say raw material, intermediate goods, and capital-machinery imports all were lower in the last fiscal year to June 30, 2023.
"I think this right picture is mainly due to import compression by Bangladesh Bank," says Dr M. Masrur Reaz, Chairman and CEO of Policy Exchange Bangladesh, a private think-tank.
He mentions that many Chinese suppliers extended their arms to Bangladeshi buyers during this compression of imports by sending goods on long-term deferred payments.
"I know there are some goods that came in Bangladesh through outside the formal trading system in the wake of LC compressions," Dr Masrur says about the trade generosity.
Entrepreneurs say that there was no significant business expansion or new investment during this era of high cost of doing business, mostly due to higher inflation.
"During this higher inflation, everything is explosive. So many enterprises are waiting for the easing of the rate of inflation," Anwar Ul Alam Chowdhury Pevez, managing director at a leading export-oriented industrial unit-Evince Group-told the FE writer.
He sees dollar shortage as another reason behind poor contraction. "We cannot import as banks are discouraging many imports by citing dollar shortage as the reason," the entrepreneur says about domino effect of the import slowdown on the economy.
Mr Pervez said many have been in wait for the forthcoming general election in the country that has generated an ambiance of tension.
However, Bangladesh's trade gap with the rest of the world during the fiscal year 2023 stood at $15.2 billion as its outflows were worth $62.6 billion and inflows $47.4 billion. One dollar = Tk 110
© 2024 - All Rights with The Financial Express
