The country’s current account balance registered a deficit of $ 1.48 billion in the recently concluded fiscal year 2016-17 for the first time in last five years due to a negative growth of inward remittance, trade balance, services and primary income.
The current account balance, the gap between export receipts and net earnings, including remittances, and import payments and profit repatriation by multinational companies and local people, earlier registered its all-time high surplus at $4.26 billion in the previous fiscal year of 2015-16.
Bangladesh Bank officials and an expert said that it was an unusual phenomenon for a country that the record surplus in the current account balance had just plunge into a large gap within one month.
The country’s current account balance stood at $2.87 billion in FY15, $1.40 billion in FY14, $2.38 billion in FY13 and a deficit amount of $447 million in FY12.
In the latest monetary policy for July-December of 2017, the central bank projected that the deficit in the current account balance would widen further to $2.72 billion this fiscal year.
The BB also forecasted that the country’s trade deficit would cross $11 billion this fiscal year 2017-18 due to recent pressures on the economy’s external sector strength.
It would be a tough job for the government to achieve 7.40 per cent gross domestic product growth this fiscal year due to the large volume of trade deficit and gap in current account balance, a BB official said.
Former interim government adviser Mirza Azizul Islam on Sunday told New Age that a slow growth of export earnings and negative growth of inward remittances had created the large gap in the current account balance.
The drop in the current account balance would put an adverse impact on the country’s macroeconomic situation if the import payments increase more in the months to come than that of the previous period, he said.
He said that the government should take immediate measures to increase the export earnings by creating new markets in different countries and raising inflow of remittances through exporting manpower.
A country needs to receive loans if its current account balance registers a deficit figure, the BB official said.
For this reason, surplus balance of the current account is considered positive for any country, he said.
The BB data, however, showed that the net foreign direct investment increased by 32.76 per cent to $1.70 billion in FY17 from that of $1.28 billion in FY16.
In FY17, medium- and long-term foreign loans also increased by 4.65 per cent to $3.17 billion in FY17 from $3.03 billion in FY16.
The financial account in the country’s balance of payments posted a surplus amount of $4.17 billion in FY17 from a surplus amount of $944 million in 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 $3.16 billion in FY17 against $5.03 billion in FY16 due to a declining trend in current account balance.
Want stories like this in your inbox?
Sign up to exclusive daily email
More Stories from Banking