FE Report
Bangladesh's balance of trade swung back into positive territory at the outset of the current financial year, posting a US$195-million surplus in July in what is seen as a rare case.
Economists see such development as an outcome of suppressed demand for imports necessary for stronger domestic economic activities and hence not encouraging for the overall economy.
The balance of trade developed into a surplus in the first month of the current FE from a $129 deficit in July 2013.
According to central bank's latest statistics, the surplus was registered as imports declined compared to the merchandise exports.
The monthly exports also decreased by more than 1.0 per cent to $2.97 billion in July from the same period last year. But the import fall far outstripped the export decline, plunging by more than 11 per cent to $2.77 billion, the data showed.
"The declines were seen in almost all leading contributors to the country's imports," it is stated in the central bank data.
Capital machinery, raw cotton, wheat, edible oils, cement, and sugar were cited as the major components of imports.
The capital-machinery imports in terms of letter-of-credit (LC) settlement dropped more than 11 per cent last July. Wheat required for mainly industrial consumption marked a fall by nearly 57 per cent.
The imports of other major products like crude edible oils for refineries plunged 44 per cent, raw cotton by 21-plus per cent, chemicals and chemical products 18 per cent and cement by 37 per cent.
On the other hand, country's merchandise exports--mainly the apparels, which contribute around 80 per cent to total export earnings-fell to some extent following a squeeze in demand on the US market.
Export earnings from the USA, the largest single export destination for Bangladeshi-made goods, registered a downturn in the first two months (July-August) of the current fiscal (2014-15). The income decreased by more than $85 million to total $892.47 million against the mark in the same period in the last fiscal year.
Economists are of the view that this is not a good sign for the economy as the demand for imported goods on the domestic market has fallen. The fall implies weaker economic activities in the country, they say.
They also said demand for Bangladeshi-made products in the external markets also shrank, leading to weaker economic activities by Bangladesh with the rest of the world.
However, the economic analysts said this is one-month account of trade transactions and so there's nothing to conclude. But if the prevailing situations prevailed, it would be a headache for the economy.
Ahsan H Mansur, executive director at the Policy Research Institute of Bangladesh (PRI), noted this is unexpected scenario as Bangladesh is an import-dependent country and it implies the economy weakened in July.
"There are products which do not require imported raw materials, be it for export or domestic consumption, so fall in import implies that the economic activity is weakened," he said.
He said imports are the most important variable affecting movement of the balance-of-payments pendulum. He however said the other components of the balance of payments, including the current-account balance, are quite in line with the target.
The slowdown in economic activities this year was translated into lower imports and therefore a lower deficit in the balance of trade, which resulted in the shrinking of the balance-of-payments deficit.
Dr AK Enamul Haque, a professor of Economics at the East West University, said there is nothing that could be decided by analysing the single-month data.
"We can just say that July is not good month for Bangladesh as both export and import were not satisfactory," he added.
jasimharoon@yahoo.com
Trade balance turns positive at start of FY
FE Team | Published: October 11, 2014 00:00:00 | Updated: November 30, 2026 06:01:00
Share if you like