Trade deficit soars to $6b in 8 months

AKM Zamir Uddin | Published: 23:12, Apr 05,2017

 
 

The country’s trade deficit soared by 45.39 per cent to $6.08 billion in the first eight months of the current financial year 2016-17 compared with that of $4.18 billion in the corresponding period of the FY16 as import payment growth is outpacing export earning growth by a long margin this FY.
According to the latest Bangladesh Bank data, the export earning growth dropped to 3.31 per cent in the July-February period of the FY17 compared with that of 7.81-per cent growth in the same period a financial year ago.
The import payment growth, however, rose to 9.52 per cent in the July-February period of the FY17 compared with that of 6.98 per cent growth in the same period of the FY16.
The export earnings stood at $22.29 billion in the first eight months of the FY17 while the earnings were $21.57 billion in the same period of the FY16. The export earnings stood at $20.01 billion in the July-February period of the FY15.
The import payments stood at $28.38 billion in the first eight months of the FY17 while it was $25.76 billion in the corresponding period of the FY16. The import payments stood at $24.08 billion in the first eight months of the FY15.
A BB official told New Age on Tuesday that the country’s export earnings posted a sluggish growth in the first eight months of the FY17 because of slow earnings from major markets like the United States and the United Kingdom.
He said that the import payments mainly increased in the last few months due to a rise in payments for capital machineries, industrial raw materials and some other commodities.
Former finance adviser to the interim government AB Mirza Azizul Islam earlier told New Age that falling export growth of readymade garments, the main export product of the country, had dented the overall earnings in recent months while import payment had maintained an increased trend.
He said that the country’s export sector lacked diversification in both products and foreign markets.
The slower growth in the export earnings will put an adverse impact to attain the country’s desirable GDP growth this financial year, he pointed out.
The country’s current account balance registered a deficit of $1.11 billion in the first eight months of FY17 against a surplus of $2.90 billion in the same period of the FY16 due to a negative growth in trade balance, services and primary income.
The current account balance, the gap between export receipts and net earnings in services including remittances and import payments and profit repatriation by multinationals and local people, has been in the negative territory for the last few months mainly due to slower export earnings growth.
The BB official said a large deficit in current account balance would put an adverse impact on the country’s macroeconomic situation in the coming months as the import payments increased significantly in recent months.
Mirza Aziz said that a slower growth in export earnings was the main cause of the large deficit in the current account balance.
The negative growth in the inward remittance also put an adverse impact on the current account balance, he said.
External liabilities of the government are not much high, so the deficit in the current account would not put any adverse impact on the macroeconomic situation right now, he said.
‘But, the macroeconomic situation will deteriorate if the country maintains the large deficit in the current account for long,’ he said.
The BB data, however, showed that the net foreign direct investment increased by 16.91 per cent to $1.17 billion in the July-February period of FY17 from that of $997 million in the same period of FY16.
In the first eight months of the FY17, medium- and long-term foreign loans, however, decreased to $1.72 billion from $1.73 billion during the same period a financial year ago.
The financial account in the country’s balance of payments posted a surplus of $2.90 billion in the July-February period of FY17 from a surplus of $824 million during the same period of FY16.
The financial account includes foreign direct investment, portfolio investment, and medium- and long-term loans.
The BB data, however, showed that the country’s overall balance dropped to $2.44 billion in the first eight months of FY17 against $3.14 billion in the same period of FY16 due to a large deficit in the current account balance. 

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