ISLAM SIDDIQUE |
Posted:
Jan. 03, 2022, 8:38 a.m.
| Update:
Jan. 03, 2022, 9:01 a.m.
Bangladesh has seen its trade deficit more than double in the first five months of the current fiscal year as increased pressure from imports and payments on the economy results in an imbalance in the accounts, officials said.
The trade deficit with the rest of the world widened from 148.31 percent or $ 7.48 billion to $ 12.53 billion in the July-November period of fiscal year 2021-22 from 5, $ 05 billion in the same period of FY21, according to the central bank report. latest statistics.
During the period under review, import expenditure increased by nearly 54 percent while export earnings grew by 22.65 percent.
The overall cost of imports stood at $ 31.17 billion in the July-November period of fiscal year ’22, compared to $ 20.24 billion in the same period a year earlier, while export earnings grew at a slower pace to $ 18.64 billion from $ 15.19 billion.
“This is a temporary phenomenon,” a senior Bangladesh Bank (BB) official told FE while explaining the latest trend in Bangladesh’s foreign trade. “It took us longer to reach the pre-covid level.”
In fact, foreign trade, covering import and export, increased considerably during the period under review against the background of the gradual reopening of economic activities, both national and global, after more than a year of pandemic disruptions. .
In addition, higher prices of essential commodities, including petroleum products, in the world market also pushed up the country’s import payments during the period, according to the official.
He also said that the upward trend in foreign trade could continue in the coming months after the reopening of trade activities across the world.
Speaking to FE, Mustafa K Mujeri, executive director of the Institute for Inclusive Finance and Development (InM), said export earnings as well as remittances should be improved to reduce the trade deficit Crescent.
“The government should facilitate the exploration of new markets to increase export earnings in the near future,” suggests the senior economist as a measure to manage the imbalance.
He also says that exports of high-value products as well as commodities should be further increased to boost Bangladesh’s overall export earnings.
“Surveillance needs to be stepped up to curb non-essential imports,” Mujeri, also a former BBB chief economist, said in answering a question.
At the same time, the country’s current account deficit deteriorated further during the period under review as a result of higher import payment obligations and a decrease in remittances.
The current account deficit reached $ 6.19 billion in the July-November period of fiscal year 22, down from $ 3.78 billion a month earlier. This was a surplus of $ 3.55 billion over the same period of FY’21.
The inflow of remittances fell nearly 21% to $ 8.61 billion in the first five months of FY’22, from $ 10.89 billion in the same period of FY’21 as money transfers through informal channels such as Monday have resurfaced after a lull caused by the coronavirus pandemic.
Experts predict, however, that the ongoing recovery in the current account deficit could continue in the months to come if the drop in remittances and rising import spending persist.
They also believe that the pressure on the exchange rate could increase further if the upward trend in the current account deficit persists in the near future.
However, the financial account surplus improved further following increased inflows of medium and long-term loans as well as aid flows, according to BB officials.
The financial account surplus reached $ 4.59 billion in the July-November period of fiscal year 22, compared to $ 1.47 billion in the same period of the previous year.
Indeed, the soaring trade deficit as well as the current account reflects the growing imbalance of the external account, thus creating increasing pressure on the country’s overall balance of payments (BoP).
BB data shows the BoP posted a negative balance of $ 2.02 billion in the first five months of FY’22 compared to a positive balance of $ 5.07 billion in the same period of FY’21 .
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