Bangladesh's current-account deficit hits an 'all-time high' at $18.70 billion as widening trade gap coupled with lower remittance receipts upsets the country's macroeconomic balance, officials say.
The trade deficit exceeded $33-billion mark in the just-past fiscal year (FY), 2021-22, for higher import-payment obligations largely for global price spirals, they add.
The trade gap with the rest of the world increased by nearly 40 per cent or $9.47 billion to $33.25 billion during the July-June period of FY'22, from $23.78 billion in the same period of the previous fiscal year, according to the central bank's latest statistics released Monday.
During the period, import expenses ballooned nearly 36 per cent while export earnings recorded more than 33-percent growth, upsetting the balance-of-payments (BoP) barometer for the national economy.
The overall import cost stood at $82.49 billion in the fiscal against $60.68 billion a year before while export earnings rose to $49.25 billion from $36.90 billion.
Senior economists and experts urge the policymakers to take effective measures immediately to enhance the capacity of foreign-currency earnings through expediting the inflow of remittances along with export proceeds.
They also request the central bank to continue the ongoing strict monitoring for curbing the imports of 'unnecessary' or non-essential products until stability comes back on the country's foreign-exchange market.
Meanwhile, Bangladesh's current-account deficit reached nearly $19 billion for the first time in FY'22 following higher import payments alongside lower inflow of remittances.
The current-account deficit rose to $18.70 billion during the July-June period of the FY'22 from $4.57 billion in the same period in FY'21. It was $17.29 billion in the first 11 months of the outgoing fiscal year.
On the other hand, the flow of inward remittances dropped by more than 15 per cent to $21.03 billion in the FY'22 from $24.78 billion a year before.
Senior officials of the Bangladesh Bank (BB) predict that import expenses will decrease in the current fiscal year following the ongoing regulatory measures that would be continued.
The central bank has already announced ten regulatory measures aiming to improve the foreign-currency-liquidity situation on the money market through discouraging unnecessary imports.
Among the regulatory measures are encashing 50 per cent of total foreign currency held in relevant export retention quota (ERQ) accounts, slashing 5.0 percentage points of the net open position (NOP) limit of commercial banks and reporting prior to opening a letter of credit (LC) for imports worth $3.0 million or above to the central bank.
"We expect that both trade deficit and current-account balance will improve in FY'23," a senior BB official tells the FE.
Talking to the FE, Mustafa K Mujeri, executive director of the Institute for Inclusive Finance and Development (InM), said Bangladesh should take effective measures to increase the capacity of foreign- currency earning through enhancing export proceeds as well as the inflow of remittances.
"We should take initiative to export skilled manpower alongside diversifying labour market abroad for boosting inflow of remittances," Mr Mujeri, also a former chief economist of the BB, says while replying to a query.
The senior economist also suggests the country's export earnings should be enhanced soon by exploring new markets with fresh products in the basket.
On the other hand, the financial account's surplus also decreased nearly 3.0 per cent to $13.67 billion in FY'22 from $14.07 billion a year before, the BB data showed.
However, the inflow of medium-and long-term (MLT) loans rose by nearly 32 per cent to $9.81 billion during the period under review from $7.45 billion in the FY'21 while net aid flows rose to $8.28 billion from $6.03 billion.
The higher deficits in trade as well as the current account reflect the growing imbalance on the external front, thus creating mounting pressure on the country's overall balance of payments or BoP.
The BB data show that the BoP posted a negative balance of $5.38 billion in the FY'22 against a positive balance of $9.27 billion a year ago.
Talking to the FE, another BB senior official said external situation on the economy may improve gradually in the coming months as the central bank along with the government have already taken different regulatory measures to ease pressure of import-payment obligations and thus buttress country's falling foreign-exchange reserves.
"Import has already started a falling trend in July while the inflow of remittances increased following the measures," the central banker explains.
Actually, the foreign-exchange market is expected to bring stability fully in second quarters of the FY'23 because of weak monetary transmission system in Bangladesh, according to the central banker.
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