Trade deficit widens to $14.5b in nine months

HM Murtuza | Published: 22:45, May 20,2021

 
 

A file photo shows containers in the Chattogram port. The country’s trade deficit rose by 20.03 per cent or $2.42 billion in the July-March period of the current fiscal year 2020-21 amid contraction in export earnings and surge in import payments. — New Age photo

The country’s trade deficit rose by 20.03 per cent or $2.42 billion in the July-March period of the current fiscal year 2020-21 amid contraction in export earnings and surge in import payments.

The latest Bangladesh Bank data showed that the country’s trade deficit rose to $14.5 billion in July-March of FY21 from $12.08 billion in the same period of FY20.

Asked about the ballooning trade deficit, former adviser to an interim government AB Mirza Azizul Islam told New Age, ‘The situation has developed as the export sector is not performing well.’

Identifying the Covid outbreak as a major reason behind the fall in the export earnings, he said that delays in receiving much of the export proceeds also contributed to the decline in export earnings.

The export earnings dropped to $3 billion in March from $3.14 billion in the previous month. The earnings stood at $3.37 billion in January.

The situation, however, improved slightly in April with the earnings reaching $3.13 billion.

In July-March of FY21, the earnings were almost static as the country fetched $28.27 billion against $28.25 billion in the same period of FY20.

On the contrary, import payments increased by 6.04 per cent to $42.77 billion in July-March of FY21 against $40.33 billion in the same period of FY20.

The import payments rose to $5.7 billion in March from $5.15 billion in the previous month. The import payments stood at $6.69 billion in January.

Speaking about the import payment situation, Mirza Azizul said, ‘Import is vital for our country to keep the production situation intact as well as to improve the export situation.’

He, however, said, ‘Unless the country’s export earnings can be improved, the trade deficit would widen further.’

Given the trade deficit, dependency on foreign exchange reserve might increase and lead to deteriorations in the foreign exchange reserve, said Mirza Azizul.

Asked about his assessment, the former adviser mentioned that he could not see any hopes of immediate recovery from the situation.

Instead, he said, it would take time for the export earnings to gain momentum.

The BB data also showed that the country’s gross foreign direct investments inched up by 2.33 per cent to $2.55 billion in July-March of FY21 from $2.49 billion in the same period of FY20.

However, the country’s net FDI dropped by 7.96 per cent to $948 million in the first nine months of the current fiscal year from $1.03 billion in the same period of the previous fiscal year.

Foreign investors withdrew $222 million in portfolio investments from the stock market in July-March of FY21 against $39 million in investments in the same period of the previous fiscal year.

However, the country’s current account had a positive balance of $125 million in July-March of FY21 against a $2.65billion deficit in the first nine months of FY20.

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