Country’s trade deficit set to hit record $10b in FY17

AKM Zamir Uddin | Published: 23:02, Jul 10,2017

 
 
The country’s trade deficit is set to cross $10 billion for the first time in the just concluded fiscal 2016-17 as the deficit in the first 11 months of the year stood at $9.19 billion, increasing by 42.58 per cent compared with that of the same period of FY16. Bangladesh Bank officials said that the trade deficit might cross $10 billion mark in the just-concluded fiscal year as export earnings decreased to $3.04 billion in June of FY17, posting a year-on-year negative growth of 15.27 per cent, from $3.50 billion during the corresponding month of FY16. Although the central bank is yet to get the import payment related information of June, the payment might stand between $3.80 billion and $4 billion considering the last few months’ trend, they said. The trade deficit, the gap between the export earnings and the import payments, posted a record $9.32 billion in FY 2011-12. The deficit rose by $1.01 billion in a single month in May and $1 billion in April of FY 17. Finance adviser to a former interim government Mirza Azizul Islam told New Age on Monday that the large trade gap had hit the country’s macro-economic situation, but the data provided by the government had not reflected the matter. He suspected that the government might manipulate the information to show the achieved GDP growth of 7.24 per cent in FY17 as such growth was not achievable considering the lower export earnings in FY17. There is also a question of accuracy of actual import payment data in the recent context of Bangladesh since no large-scale investment is were available here, he said. He feared that a section of people had been laundering money abroad for long through the foreign trade financing that ultimately increased the overall import payments in the recent months. The export earnings dropped to 3.80 per cent in the first 11 months of FY17 against 8.01 per cent growth in the corresponding period of FY16, according to the BB data. The import payment growth, however, rose to 10.68 per cent in July-May of FY17 against 5.76 per cent growth in the same period of FY16. The export earnings stood at $31.05 billion in the first 11 months of FY17 while the earnings were $29.91 billion in the same period of FY16. The import payments stood at $40.25 billion in the first 11 months of FY17 while those were $36.37 billion in the corresponding period of FY16. A BB official said that the country’s export earnings posted a sluggish growth in recent months mainly due to slow earnings from the export of RMG, the main export product of the country. As a result of a big fall in remittance, the current account balance posted a huge deficit in the first 11 months of FY17. From July to May of FY17, the country’s current account balance registered a large deficit of $2.10 billion from a robust surplus of $3.19 billion in the corresponding period of FY16. The deficit in current account balance will not bring any problem right now as the country is now enjoying more than $32 billion in foreign exchange reserves, the BB official said, adding that the country would be able to meet its import cost for eight months using the reserves. The current account balance plunged in the deficit zone due to a slump in remittance inflow, the central banker said. The BB data, however, showed that the net foreign direct investment increased by 27.75 per cent to $1.62 billion in the July-May period of FY17 from that of $1.27 billion in the same period of FY16. In the first 11 months of FY17, medium- and long-term foreign loans, however, decreased to $2.39 billion from $2.46 billion during the same period a financial year ago. The financial account in the country’s balance of payments posted a surplus of $34.19 billion in the July-May period of FY17 from a surplus of $1.17 billion 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 $2.68 billion in the first 11 months of FY17 against $4.14 billion in the same period of FY16 due to a large deficit in the current account balance.

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