Trade deficit doubles as imports tip the balance

Gap between import payments and country’s export earnings in July-Oct widens to $5.79b


Siddique Islam | Published: December 12, 2017 23:40:10


Trade deficit doubles as imports tip the balance


Bangladesh's overall trade deficit more than doubled in the first four months of this fiscal year (FY) as higher import payments against lower export receipts tipped the balance.
The deficit rose by nearly 109 per cent to US$ 5.79 billion during the July-October period of FY 2017-18 from $2.77 billion in the same period of the previous fiscal, according to the latest central bank statistics.
"Higher import-payment obligations than export earnings pushed up the country's overall trade deficit significantly during the period under review compared to the same period of the FY 17," a senior official of the Bangladesh Bank (BB) told the FE Tuesday.
He also up-trend in prices of some essential commodities on the global market contributed to the higher import growth in the first four months of the current financial year.
Overall import costs increased by nearly 29 per cent to $17.14 billion during the period under review, from $13.32 billion in the corresponding period, the BB data showed.
The overall volume of imports bloated mainly due to higher import of food-grains, petroleum products and capital machinery, according to the bankers.
Former governor of Bangladesh Bank (BB) Salehuddin Ahmed suggested that the import should be monitored closely by the authorities concerned to ensure actual prices of imports.
"The central bank and the National Board of Revenue (NBR) should work jointly to monitor the overall imports," Dr. Ahmed said, on a note of skepticism.
Regarding the exchange-rate policy, the former BB governor said the depreciation of the local currency against the US dollar continuously may fuel the inflationary pressures on the economy in the near future.
He also advised that the authorities concerned provide incentives for different exportable products along with readymade garments for diversifying export earnings in order to strike a balance in the external trade.
The country's export earnings grew 7.63 per cent to $11.35 billion in the four months of the FY 18 against $10.54 billion in the same period of previous fiscal.
"The overall trade deficit may shrink in the coming months if the export earnings grow by 8.20 per," another BB official hinted.
The BB data also showed that deficit in services trade also increased to $1.44 billion in the first four months of the FY 18, which was $1.05 billion in the same period of the previous fiscal.
Trade in services includes tourism, financial service and insurance.
In a cascading impact higher trade deficit also affected the current-account balance, pushing it down significantly, despite an uptrend in inward remittances.
The country's current-account deficit rose to $3.31 billion during the July-October period of the FY 18 from only $44 million in the same period of the previous fiscal.
The remittance inflow, however, increased 6.27 per cent to $4.45 billion in the four months from $4.19 billion in the period of comparison.
However, the financial account showed a surplus of $2.67 billion in the first four months of the current fiscal year which was $1.72 billion in the same period of FY 17.
Higher inflows of Foreign Direct Investment (FDI) as well as medium-and long-term loans help maintain a robust surplus in the financial account, the BB data showed.
Gross inflow of foreign direct investment increased 9.42 per cent to $1.15 billion during the period under review from $ 1.05 billion in the same period of FY 17.
Besides, net FDI inflow rose by 14.38 per cent to $ 716 million from $626 million.
Nevertheless, the country's overall balance-of-payments (BoP) pendulum slid to a deficit of $225 million, which was in a healthy surplus of $2.04 billion in the same period of FY 17.
The BoP deficit was $360 million in the first quarter (Q1) of the FY 18.

siddique.islam@gmail.com

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