Deficit narrows in current account, widens in trade

Export cargo

Jehangir Hussain

Increased private transfers of money to the country and declined imports have further narrowed current account deficit that during July-February period in the running fiscal  stands at (-) $4.39 billion which is three fold down from (-) $13 billion during the same time in the last fiscal.

The expatriates workers and Bangladeshis living abroad sent $14.41 billion in first eight months of the current fiscal which is 4.04 per cent higher than $13.85 billion over the corresponding period of the last fiscal.

According to Bangladesh Bank’s (BB) latest statistics trade deficits also narrowed during first eight months of the current fiscal though it slightly widened in February compared to in January due to higher imports for Ramadan.

In July-February of the current fiscal the country’s exports were $35 billion against its imports worth  $49 billion thus the deficit stands at $14 billion.

On the other hand due to the government’s strict measures to control imports in first eight months of the current fiscal imports dropped by 10.27 per cent to $48.8 billion from $54.4 billion in July-February last year.

But the growing concern is continuous decline in  financial accounts which may impact foreign direct investments.

Foreign portfolio investments and foreign direct investments are not in good shape posing challenge to woo foreign investments and also to retain the existing ones.

On the other hand the overall balance of payment is at record negative of $7.95 billion in July-Feb this fiscal which in same the period of last fiscal was negative by $2.2 billion.

When contacted a senior official in the BB said a negative balance of payments can have various causes, such as a lack of competitiveness in the export market, an increase in imports due to domestic demand, or a decrease in foreign investment.

If the negative balance persists, it can lead to a decrease in a country's foreign exchange reserves, which can cause problems for its economy, such as currency devaluation and inflation.

To address negative balance of payment, a country can take various measures such as promoting exports, reducing imports, attracting foreign investment, or implementing monetary and fiscal policies to stabilise the economy. However, the most effective approach depends on the specific circumstances of the country and the underlying causes of the negative balance of payments, he said.

A retired senior banker said one of the main reasons for this negative balance of payments is the country's high import bill. Bangladesh heavily depends on imports for its raw materials and capital goods, and its exports have been growing at a slower pace than imports. Additionally, the country has been experiencing a decline in remittances in recent times, borrowing from external sources and there are liabilities that have also contributed to the negative balance of payments, he said.

To address this issue, the government of Bangladesh has been implementing policies to promote exports and reduce imports the banker added and said this includes providing various incentives for exporters and increasing investment in the country's infrastructure to improve the business environment.

The government is also encouraging the diversification of exports to reduce dependence on a few key products, such as readymade garments and textiles.

The BB statistics on balance of payments show that the foreign currency reserves in central bank in July-February was $32 billion, barely enough to pay import bills for 5.4 months.

As per latest statistics the reserve till April 4  further dropped to $31 billion.

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