Trade deficit hits record high
Sunday, 2 September 2007
Trade deficit has reached an 11-year high of US$3,458 million in fiscal 2006-07, amid a fall in the growth of export earnings against increasing import payments, reports bdnews24.com.
The increase in trade deficit coupled with a fall in export growth may deplete foreign exchange reserves, influencing the depreciation of the taka and hiking the prices of imported commodities in a period when inflation is already surging.
"It's not worrying right now considering the current level of reserves. But it's a matter of concern the way the growth of export earnings is slowing," said Research Director of Bangladesh Institute of Development Studies Zaid Bakht.
According to the latest data from the Bangladesh Bank, the trade deficit rose by 19.69 per cent to $3,458 million in fiscal 2006-07 from $2,889 million a year ago.
It was the highest amount since fiscal 1996-97 when trade deficit was about $2,800 million.
The growth of export earnings fell 5.94 percentage points in fiscal 2006-07 from 21.63 per cent a fiscal year ago.
A central bank analyst, who preferred not to be named, said the drop in export growth might affect reserves and influence depreciation of taka.
"It may also increase prices of import-led commodities and hurt employment," he said.
Industrialists and trade experts attribute the drop in export growth to political unrest in the first half of fiscal 2006-07, seasonal changes in the European market and petroleum price hikes.
"It's because of external factors. The fall in the growth of exports is in no way related to internal factors," said President of Bangladesh Knitwear Manufacturers and Exporters Association Fazlul Hoque, referring to seasonal changes in Europe and petroleum price hikes in the global market.
"It appears that buyers cannot predict future demands of their market because of changes in weather. But I hope, export earnings will rise by September," he said.
Ongoing reform measures by the present government have also influenced entrepreneurs' sentiments, experts observed.
By contrast, commodity price hikes in the global market have mainly contributed to a rise in import payments, they said.
Growth in import payments rose 4.23 percentage points to 16.35 per cent in fiscal 2006-07 from 12.17 per cent a year earlier.
In fiscal 2006-07, the country paid $15.51 billion against imports, compared with $12.05 billion in exports earnings, BB statistics show.
Of the components, import payments for industrial raw materials grew by more than 600 per cent, for consumer goods about 400 per cent and for capital machinery as well as intermediate goods doubled.
Commerce Secretary Firoz Ahmed said price hikes of various commodities in the international market resulted in the rise in import payments and failure to attain the export growth target.
"Nothing to worry about as long as exports are increasing," he said.
"The commodity composition in import payments is positive. The rise in imports of capital machinery, industrial raw materials and intermediate goods will help boost production of import substitutes and export-led items."
President of the Federation of Bangladesh Chambers of Commerce and Industry Mir Nasir Hossain said the economy is passing a 'transition phase'.
He said the political unrest prior to the installation of the caretaker government might have influenced exports.
"The ongoing reforms by the present government also put the economy in a transitional phase. It's temporary. Economic activities will gain momentum when the situation is back to normal," he said.
The increase in trade deficit coupled with a fall in export growth may deplete foreign exchange reserves, influencing the depreciation of the taka and hiking the prices of imported commodities in a period when inflation is already surging.
"It's not worrying right now considering the current level of reserves. But it's a matter of concern the way the growth of export earnings is slowing," said Research Director of Bangladesh Institute of Development Studies Zaid Bakht.
According to the latest data from the Bangladesh Bank, the trade deficit rose by 19.69 per cent to $3,458 million in fiscal 2006-07 from $2,889 million a year ago.
It was the highest amount since fiscal 1996-97 when trade deficit was about $2,800 million.
The growth of export earnings fell 5.94 percentage points in fiscal 2006-07 from 21.63 per cent a fiscal year ago.
A central bank analyst, who preferred not to be named, said the drop in export growth might affect reserves and influence depreciation of taka.
"It may also increase prices of import-led commodities and hurt employment," he said.
Industrialists and trade experts attribute the drop in export growth to political unrest in the first half of fiscal 2006-07, seasonal changes in the European market and petroleum price hikes.
"It's because of external factors. The fall in the growth of exports is in no way related to internal factors," said President of Bangladesh Knitwear Manufacturers and Exporters Association Fazlul Hoque, referring to seasonal changes in Europe and petroleum price hikes in the global market.
"It appears that buyers cannot predict future demands of their market because of changes in weather. But I hope, export earnings will rise by September," he said.
Ongoing reform measures by the present government have also influenced entrepreneurs' sentiments, experts observed.
By contrast, commodity price hikes in the global market have mainly contributed to a rise in import payments, they said.
Growth in import payments rose 4.23 percentage points to 16.35 per cent in fiscal 2006-07 from 12.17 per cent a year earlier.
In fiscal 2006-07, the country paid $15.51 billion against imports, compared with $12.05 billion in exports earnings, BB statistics show.
Of the components, import payments for industrial raw materials grew by more than 600 per cent, for consumer goods about 400 per cent and for capital machinery as well as intermediate goods doubled.
Commerce Secretary Firoz Ahmed said price hikes of various commodities in the international market resulted in the rise in import payments and failure to attain the export growth target.
"Nothing to worry about as long as exports are increasing," he said.
"The commodity composition in import payments is positive. The rise in imports of capital machinery, industrial raw materials and intermediate goods will help boost production of import substitutes and export-led items."
President of the Federation of Bangladesh Chambers of Commerce and Industry Mir Nasir Hossain said the economy is passing a 'transition phase'.
He said the political unrest prior to the installation of the caretaker government might have influenced exports.
"The ongoing reforms by the present government also put the economy in a transitional phase. It's temporary. Economic activities will gain momentum when the situation is back to normal," he said.