Trade gap soars to $17b, current account deficit $9b in 11 months

Staff Correspondent | Published at 10:44pm on July 10, 2018

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A file photo shows containers at the Kamalapur Inland Container Depot in Dhaka. Country’s trade deficit soared by 84 per cent to $17.2 billion in the July-May period of the just concluded fiscal year (2017-2018) as import payments surged past $50 billion in the 11 months. — New Age photo

Country’s trade deficit soared by 84 per cent to $17.2 billion in the July-May period of the just concluded fiscal year (2017-2018) as import payments surged past $50 billion in the 11 months.
Current account balance also reached negative $9.3 billion in the first 11 months of FY18, according to the latest Bangladesh Bank data.
The gap in trade balance and current account balance was $9.3 billion and $2.2 billion respectively in the same period of the previous fiscal year (2016-2017), the data showed.
Overall balance also remained in the negative zone with $970 million in the period of FY18, which was $2.6 billion in the same period of FY17.
Terming the situation a matter of concern for both external and internal sectors of the economy, economists and experts stressed prompt and required steps to address the causes of the situation.
They said that continuation of ascending deficit in trade balance and current account balance would affect the macroeconomic stability and put pressure on foreign exchange reserve.
They also suspected that money laundering might have taken place through import payments.
According to the central bank data, import payments grew by 25.52 per cent to $50.5 billion in July-May of FY18 against $40.2 billion in the same period of FY17.
On the other hand, export earnings grew only by 7.79 per cent to $33.3 billion in the period of last fiscal year compared with that of $30.9 billion in the same months of the previous fiscal year.
Policy Research Institute executive director Ahsan H Mansur said that the country passed the year with foreign debt financing.
The deficit in current account balance may cross $10.5 billion in FY18 if the annual export earnings are considered.
Export earnings stood at $36.66 billion with 5.81 per cent growth in FY18 over the previous FY17, according to the Export Promotion Bureau data.
‘The country may continue to move forward a year with such imbalance in current account balance, but the country will lead towards bankruptcy if the situation remains same for two and a half years further,’ he said.
The country’s foreign debt now stands at $26 billion accumulated in 40-45 years, but the amount would double in just two and a half years if the current account imbalance remains same, he said.
He hoped that the government would take appropriate policy including letting the interest rate and foreign exchange rate to run based on the market.
He also suggested that the government scrutinise the import payments to find whether or not money were laundered through the import payments.
Former BB governor Salehuddin Ahmed said that such imbalance situation was created due to excessive growth in import than that of export.
‘The issue is whether there were proper imports or money was laundered in the name of imports,’ he said.
Imbalance in trade and current account would put pressure on macroeconomic stability in future through devaluation of currency, rising inflation and affecting investors’ confidence, he said.
He said that the current account balance would be more abysmal if growth in remittance inflow would slow.
The inward remittance, however, climbed by 17.09 per cent to $13.33 billion in the first 11 months of FY18 from $11.38 billion in the same period of FY17.
Bangladesh Bank should closely monitor the situation and address the issues in its next monetary policy statement, he added.