Robust remittance growth helps BoP reach record surplus

FE Team | Published: September 02, 2007 00:00:00 | Updated: February 01, 2018 00:00:00

Siddique Islam
The country's overall balance of payments (BoP) situation continued to maintain a healthy trend in the last fiscal mainly due to improvements both in current and financial accounts.
The current account balance recorded a surplus in the fiscal 2006-07, thanks to robust growth of inward remittances, official sources said.
The country received $5.98 billion worth of remittances during the last fiscal against $4.80 billion in fiscal 2005-06. The amount is 24.52 per cent higher than that of the previous fiscal.
However, higher imports pushed the overall trade deficit to $3.458 billion in the last fiscal compared to that of $2.889 billion in the previous fiscal.
"Despite large deficits in services and income, the current account balance recorded a surplus of $952 million during the fiscal 2006-07 against the surplus of $824 million during the fiscal 2005-06 due to larger current transfers (including remittances by wage earners) of $6.554 billion," the Bangladesh Bank (BB) said in its Major Economic Indicators: Monthly Update-August 2007, released recently.
The overall balance showed a surplus of $1.493 billion during the last fiscal against the surplus of $338 million in the previous fiscal due mainly to surplus in current account balance of $952 million and surplus of $721 million in the financial account (including foreign direct investment), according to the monthly update.
Central bank officials, however, said the export earnings and the flow of inward remittances need to remain stable in order to sustain the surplus position of the balance of payments in the current fiscal.
"The large surplus in balance of payments will help to attract more investment in the export-oriented sectors, specially readymade garment," a BB senior official told the FE Saturday.
He also said the healthy position in the balance of payment helps to maintain a stable exchange rate of the local currency against the US dollar in the foreign exchange market.
Exchange rate of Bangladesh Taka (BDT) per US dollar decreased to Tk 68.51 at the end of July, 2007 from Tk 68.80 at the end of June last registering an appreciation by 0.42 per cent.
"The surplus balance of payments, if continues to maintain the trend, also will act as a back-up support for the overall economy," the BB official observed.
According to the BB statistics, the deficit in services increased to $1.261 billion in the last fiscal from $1.023 billion of the previous fiscal while the financial account balance stood at $721 million surplus in the last fiscal against a deficit of $141 million in the previous fiscal.
During the period, the inflow of net foreign direct investment (FDI) increased by 2.28 per cent to $760 million from $743 million despite political uncertainty.
The inflow of portfolio investment stood at $106 million in the last fiscal compared to $32 million in the previous fiscal, the BB's data showed.
Sources, however, said total aid disbursement stood at $1.624 billion in the fiscal 2006-07 against $1.567 billion of the previous fiscal.
However, the net receipts of foreign aid during the period stood at $1.099 billion as against $1.078 billion of the fiscal 2005-06.