Current-account surplus shows a surge

Bangladesh's current-account surplus shows a surge with the amount counting over half a billion dollars during July-November period of this fiscal, largely on the back of import slump.
Current-account positive or surplus is important for an economy as it shows the country's net income from its trade in goods and services in positive territory.
This surplus for the period (July-November 2023) was recorded at US$579 million, up by around 150 per cent from July-October 2023 period. The balance was a large deficit worth $5.7 billion during the same period a year earlier.
Imports declined about 21 per cent during the period of this fiscal year. On the other hand, the export receipts rose merely 1.2 per cent during the period (July-November 2023).
Financial account, another key component of the balance of payments (BoP), which was believed to be a stronghold of Bangladesh's economy, also remained in a large deficit worth $5.4 billion during the period or in five months of the current fiscal year (2023-24).
Consequently, Bangladesh's overall BoP remained in deficit at $4.9 billion during the period. However, there is some improvement in the overall BoP as the deficit was $6.0 billion during the period a year before.
Economists, however, say the July-November data show an unchanged picture on the balance of payments.
They said external imbalance persisted due to a surge in financial-account deficit.
"A large decline in imports with flat exports and remittances accounted for a current-account surplus of $579 million, compared with a $5.7-billion deficit during the same period of FY22", says Dr Zahid Hussain, an independent economist of Bangladesh.
He says this was overwhelmingly offset by a $5.4-billion deficit in the financial account, compared to a $1.26-billion surplus during the same period of the previous year.
"The overall deficit in the balance of payments declined from $6 billion in July-November 2022 to $4.9 billion during the same period in 2023, largely due to about $1.5-billion decline in unaccounted outflows (errors & omissions).
"The increased deficit in the financial remains a major concern," he notes.
"It is largely due to increased trade credit and excess repayments over drawings in short-term credit".
He mentions that increased trade credit reflects the growing difference between export shipments and receipts presumably due to underpricing of export dollars and political uncertainties.
"Access to new short-term loans is hindered by increased risk perceptions about Bangladesh economy and high interest rates abroad," Dr Hussain says.
Another economist, Dr M. Masrur Reaz, Chairman and CEO of Policy Exchange of Bangladesh, told the FE: "Financial account deficit is a growing concern for Bangladesh economy as it continued to shrink each month."
He said the status of short- and medium-term borrowing and poor investments in Bangladesh are responsible for such deteriorating condition of the financial account of the BoP.
Dr Masrur, however, sees a good sign of the BoP picture in that the overall balance of payments has improved a little bit. "It was a $6.0-billion deficit and now a $4.9-billion deficit."
Dr Masrur stressed the need for necessary depreciation of the currency to intervene in the forex- market volatility.
"To my mind, once the forex market stabilizes, the import will rise or the central bank will allow more imports."

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