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Trade gap widens as import bill tips the balance

Asjadul Kibria | Published: May 14, 2015 00:00:00 | Updated: November 30, 2024 06:01:00


Despite widening trade deficit and negative current-account balance, country's balance-of-payments (BOP) position is still in some comfort zone.
Nine-month data for the current fiscal year (FY) 2014-15, released by the central bank Wednesday, show that merchandise trade gap in the period stood at US$7.14 billion -- about 57 per cent surge over the same period of last fiscal.
Double-digit growth of import against single-digit export growth widens the trade deficit.   
Current-account balance also got into a negative territory with a $1.14 billion deficit while it had enjoyed a surplus of $1.69 billion in the first nine months of last fiscal year.
"This is around half a per cent of our GDP, and is in a comfort zone," said Dr Zaidi Sattar, chairman of the Policy Research Institute (PRI).
"Developing countries like Bangladesh need more imports and more finance," he told FE last night to explain the situation.
"For the last 10 years, Bangladesh has enjoyed current-account surplus. So negative balance may appear alarming, but is not so."  
Financial account, however, posted a wider surplus thanks to increased inflows of foreign investment and loans.
The central bank data show that foreign direct investment (FDI) has crossed $1.0 billion mark in nine months and stands at $1.13 billion.  It is 5.12 per cent higher than that of the same period of last year.
Both the trade credit and medium- and long-term loans have registered double-digit growth.
Overall balance stayed in positive territory in the period under review. The amount is, however, $2.89 billion lower than $3.89 billion in the same period of last fiscal.
"Foreign exchange ­reserve accumulation has increased in the last few months and so increased the coverage of imports," said Dr Zaidi.
 "This has, however, increased the pressure of currency appreciation. So, it is good to raise the demand of import," he added.
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