BoP surplus despite current account deficit

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FE Report
The country's overall balance of payments (BoP) continued to maintain a surplus position despite a deficit in the current account balance during the first two months of the current fiscal, official sources said.
The overall balance showed a surplus of $130 million (13 crore) during July-August, 2007 against the surplus of $107 million of the corresponding period of last year mainly due to a surplus in the financial account of $170 million, the Bangladesh Bank (BB) said in its Major Economic Indicators: Monthly Update-November 2007.
Although there was a robust growth of inward remittances, the current account balance showed a deficit of $68 million during the period, the sources added.
The overall trade deficit was estimated at $717 million in July-August period of the fiscal 2007-08 due to higher import payments. The deficit was $156 million in the corresponding period of the previous fiscal, according to the central bank statistics.
In August last, the country's merchandise export shipments rose to $1.129 billion compared to $903.72 million in July, 2007.
However, export earnings decreased to $2.032 billion during July-August of the current fiscal from $2.301 billion of the corresponding period of the previous fiscal.
"The current account deficit may come down in the near future due to higher inflow of remittances and an upward trend in the overall export performance," a BB senior official told the FE Saturday.
The official also said the overall balance of payments is likely to improve further as the country is set to receive foreign aid and foreign loans because of the recent cyclone.
Sources, however, said some donor countries and agencies have already contacted officials concerned to release their donation and soft loans in aid of the cyclone victims of the country's southern areas.
"We are hopeful about receiving donors' funds from this week," another BB official said.
"Despite a larger current transfer of $1.128 billion, the current account balance recorded a deficit of $68 million during July-August, 2007 against the surplus of $389 million during July-August, 2006 due to a larger deficit in trade balance, service and income," said the BB monthly update.
The deficit in services increased to $266 million in the same period from $237 million of the corresponding period of the previous fiscal.
The flow of net foreign direct investment (FDI) stood at $132 million in the period against $137 million of the same period of the previous fiscal. The portfolio investment was recorded in the period at $43 million against a $1.0 million deficit in the corresponding period of the previous fiscal.