H1 trade deficit doubles

Siddique Islam | Published: February 06, 2015 00:00:00 | Updated: November 30, 2024 06:01:00

The overall trade deficit of the country more than doubled in the first half (H1) of the current fiscal year (FY) 2014-15 because of higher import payments and lower export receipts, officials said.
The deficit increased by nearly 118 per cent to US$ 5.31 billion during the July-December period of FY 15 from $2.44 in the corresponding period of the previous fiscal, according to the central bank statistics, released Thursday.
"The trade deficit may widen further in the coming months, if the ongoing political uncertainty continues," a senior official of the Bangladesh Bank (BB) told the FE.
Imports increased significantly during the period under review mainly due to higher imports of capital machinery, according to the BB official.
He said higher imports in the sectors of power and energy, leather and tannery, electronics, food processing, shipbuilding, ceramic and melamine have contributed to the rise in the capital-machinery import in the H1 of the FY 15.
"Trade deficit is not necessarily bad for an emerging country like Bangladesh because the major share of imports represents capital machinery and industrial inputs which provide potentials of growth for the future," Biru Paksha Paul, chief economist of the Bangladesh Bank (BB), told the FE.
Imports increased 18.28 per cent to $20.05 billion during the period under review, from $16.95 billion in the same period of the previous year, BB data showed.
The BB chief economist said the central bank has already projected that the trade deficit may touch at $9.9 billion by the end of this fiscal.
"Though the trade deficit is more than 50 per cent of $9.9 billion by the first months of the FY 15 it is likely to be on track by the end of June 2015," Mr. Paul noted.
On the other hand, the country's export earnings grew by 1.54 per cent to $14.73 billion in the six months against $14.51 billion in the corresponding period of previous fiscal.
The economist said imports may be disturbed due to political turmoil but exports are decided by foreign income.
Besides, trade in goods, deficit in trade in services increased during the period under review. Gap in services trade stood at $2.50 billion in the H1 of the FY 15 which was $1.98 billion in the same period of the previous fiscal.
Trade in services includes tourism, financial service and insurance.
The country has earned $1.56 billion in services trade during the period under review while payment on services surged to $4.07 billion from $3.55 billion in the same period of the FY 14.
"We should rather focus more on the huge deficit in the service sector which is projected $5.6 billion by June 2015 to check this trend we must have long-term
plan to improve our human capital," the BB chief economist noted.
Talking to the FE, another central banker said higher trade deficit pushed down the current-account balance significantly, despite uptrend in inward remittances as a prop to the balance.
The remittance inflow increased 10.47 per cent to $7.42 billion in the first six months of the FY 15 from $6.72 billion in the period of comparison.
Country's current-account balance entered the negative territory in the month of September last due to higher landed imports, recorded by the customs department, the BB official added. He said the current account deficit increased by $111 million to $1.42 billion in the July-December period of the FY 15 from $1.31 billion a month ago.
It was $1.44 billion surplus during the July-December period of the last fiscal year, according to the official.
The BB also projected that the current account deficit might reach $1.35 billion in the FY 15 from the same amount surplus a year ago.
The balance of payments (BoP) came down to $1.44 billion during the period under review from $2.62 billion in the corresponding period of the FY 14.
The BoP may come down to $642 million in the FY 15 from $5.48 billion in the previous fiscal, according to the BB's latest projection.
siddique.islam@gmail.com