Trade deficit doubles to $18.25b in FY18

Current account deficit hits record $9.78b, FDI plummets

Staff Correspondent | Published: 00:05, Aug 14,2018

 
 

Country’s trade deficit doubled in last fiscal year (2017-2018) compared with that in the previous fiscal year, hitting a record $18.25 billion due to a jump in import payments, said Bangladesh Bank officials.
The current account deficit also hit a record $9.78 billion in FY18 as import payments rose and the foreign direct investment decreased.
As per the Bangladesh Bank data released on Monday, trade deficit in FY18 increased by 92.75 per cent from $9.47 billion in FY17.
Experts said significant growth in imports and less-than-expected growth in exports were the key reasons for the sharp increase in trade deficit.
They, however, suspected capital flight in the form of over-invoicing in the import process and urged the authorities concerned to look into the issue for prevention of any potential adverse impact on the country’s economy.
They said that continuation of heavy trade deficit would ultimately push inflation up and create pressure on the country’s economy as a whole.
The BB data showed that the country’s exports grew by 6.43 per cent against 25.23 per cent increase in import growth in FY18.
Exports increased to $36.205 billion in last fiscal year from $34.019 billion in the previous fiscal year.
On the other hand, import payments increased to $54.463 billion in FY18 against $43.491 billion in FY17.
As a result of huge import payments and slow growth in export earnings, country’s current account deficit increased by more than six times in last fiscal year.
As per the central bank data, current account deficit increased to $9.78 billion in FY18, increasing by 6.34 times, or $8.449 billion, from $1.331 billion in the fiscal year of 2016-2017.
On the other hand, net inflow of foreign direct investment fell by 4.23 per cent to $1.593 billion from $1.653 billion.
The country’s foreign exchange reserves declined by 1.9 per cent, or $0.639 billion, to $32.832 billion from $33.471 billion, the BB data showed.
Former interim government adviser AB Mirza Azizul Islam told New Age, ‘Trade deficit has been increasing mainly due to lower growth in exports and higher growth in imports and these altogether are resulting in current account deficit.’
‘To get rid of the situation, attention should be given to increasing exports along with scrutinising imports, as there is doubt about the actual import, to check money laundering in the form of over-invoicing,’ he said.
Discouraging imports could not be taken as a policy as it would hamper growth, he said.
Mirza Aziz also said that the growing trade deficit would affect exchange rate and subsequently fuel inflation.
Asked, Policy Research Institute of Bangladesh executive director Ahsan H Mansur told New Age that the main reasons for the trade deficit included strong import growth.
Besides, there might be some money laundering issues, he said.
The growing trade deficit has already affected exchange rate, liquidity situation and reserves, he said.
A depreciation of the taka against the dollar could help boost remittance inflow and export, and play a vital role in discouraging imports, Mansur said.

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