Healthy trend in balance of payments to continue

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Siddique Islam
The country's overall balance of payments (BoP) continued to be in surplus during the first 10 months of the fiscal 2006-07 mainly due to improvement in both current and capital accounts.
The current account balance recorded a surplus during the July-April period of the fiscal 2006-07, thanks to a robust growth of inward remittance, official sources said.
The country received $5.98 billion worth of remittances during the fiscal 2006-07 against $4.80 billion in the previous fiscal. The amount is 24.52 per cent higher than that of the previous fiscal.
The higher flow of remittance in fiscal 2006-07 was a continuation of the trend of the last fiscal when it was estimated at $4.80 billion. The growth in remittance in 2005-06 was 24.89 per cent over that of the previous fiscal.
However, higher import payments against export earning pushed the overall trade deficit to $2.92 billion during the period compared to $2.52 billion of the corresponding period of the previous fiscal.
"Despite larger deficits in services and income, current account balance recorded a surplus of $415 million during July-April, 2006-07 against the surplus of $392 million during July-April, 2005-06 due to larger current transfers of $5.32 billion," the Bangladesh Bank (BB) said in its Major Economic Indicators: Monthly Update-June 2007, released recently.
The overall balance of payments showed a larger surplus of $909 million during the period against the surplus of $43 million in the same period of the previous fiscal due mainly to surplus in current account balance and capital accounts of $415 million and $494 million respectively, according to the Monthly Update.
Central bank officials, however, are hopeful about the continuous rise in surplus in balance of payments that may help to increase investment in export oriented sectors particularly readymade garments (RMG).
"The large surplus in BoP will help attract more investment in the export-oriented sectors, specially the RMG," a BB senior official told the FE Saturday.
He also said the country's foreign exchange market will remain stable because of less volatility in exchange rate because of the surplus in the BoP.
During the period, the deficit in services increased to $1.24 billion from $849 million in the corresponding period of the previous fiscal, the BB's data showed.
The capital account balance stood at $494 million during the period against $17 million of the corresponding period of previous fiscal despite a fall in the net foreign direct investment (FDI).
The net FDI dropped by 24.24 per cent during the period over that of the same period of the previous fiscal due mainly to political uncertainty.
The inflow of FDI dropped to $425 million in the period from $561 million of the same period of the previous fiscal, according to BB statistics.
Sources, however, said total aid disbursement came down to $986.50 million during the period from $1.09 billion in the same period of the previous fiscal.
However, the net receipts of foreign aid during the period stood at $564.10 million as against $69.02 million in same period of fiscal 2005-06.