Growth in the country’s trade deficit slowed down to 5.53 per cent in the July-September period of the fiscal year of 2018-2019 compared with 133 per cent growth in the same period of the previous fiscal year due mainly to a notable growth in export earnings in the quarter.
In July-September of FY19, the country’s current account deficit also declined to $1.354 billion from $1.819 billion in the same period of the previous fiscal year.
As per the Bangladesh Bank data released on Sunday, trade deficit — the gap between import payments and export earnings — increased to $3.85 billion in July-September of FY19 from $3.65 billion in the same period of FY18.
The country’s trade deficit had widened by 133 per cent or $2.08 billion to $3.65 billion in the first quarter of FY18 from $1.56 billion in the same period of FY17.
In Q1, import payments grew by 11.48 per cent while export earnings increased by 14.01 per cent, the central bank data showed.
Although the import payments remained high, a significant increase in export earnings riding on readymade garment products slowed down the growth in trade deficit in the first quarter of this fiscal year, said BB officials.
Former Bangladesh Bank governor Salehuddin Ahmed told New Age that the growing trade deficit would ultimately create pressure on the reserves along with creating additional demand for the dollar.
Besides, an increased pressure on the dollar would ultimately create pressure on the inflation, he said.
To get rid of the situation, import needs to be checked in the way of taking measures to contain over-invoicing along with tightening BB’s monitoring on import, Salehuddin said.
Country’s export basket needs to be diversified as it is mostly dependent on readymade garments, said Salehuddin, adding that the government should also focus on increasing remittance earnings.
Country’s export earnings in the first quarter (July-September) of the current financial year (2018-19) increased to $9.94 billion compared with that of $8.66 billion in the same period of FY18 due to a huge growth in export of RMG products in the month of September.
The earnings in July-September of FY19 were 6.54 per cent higher than the target of $9.33 billion set by the government for the period, data showed. BB officials said that trade conflict between the US and China facilitated Bangladesh achieving higher export earnings.
On the other hand, import payments in July-September this year grew by $1.36 billion from $1.22 billion in the same period of the previous year.
The gap between export earnings and import payments has been rising over the years and it rose last fiscal year due to a sharp increase in import of rice and other consumer goods and higher payments against fuel oil import.
Current account deficit situation improved a bit because of increase in remittance earnings and foreign direct investments in the first quarter of this fiscal year, BB officials said.
Current account deficit is the gap between total overseas income (export receipts and net earnings like remittances) and outflow of fund (import payments and profit repatriation by multinational companies and local people).
Want stories like this in your inbox?
Sign up to exclusive daily email
More Stories from Apparel