Current account surplus doubles in five months
Bangladesh's external balance is still going strong but the central bank projects that it could weaken at the end of the fiscal year thanks to a hike in investment.
The current account surplus in the first five months of the fiscal year almost doubled year-on-year, as exports grew faster than imports.
However, Bangladesh Bank has projected that the surplus would erode to almost half by June compared to last year as investment will pick up in the coming months.
The current account surplus was $1.06 billion in July-November, which was $582 million in the same period last fiscal year, according to central bank data.
Despite a decre-ase in remittance growth, the surplus soared as exports were higher than imports; in the first five months, exports grew 5.75 percent whereas imports grew 4.67 percent. Projection for the whole fiscal year, the current account balance was $955 million, which was $1.99 billion last fiscal year, according to the central bank's Monetary Policy Statement.
“We expect 8.5 percent growth in both imports and exports and a 5 percent increase in remittance in FY16,” the BB said.
However, remittance declined 0.06 percent year-on-year in the first six months of the current fiscal year.
A recent sustained pick-up in investment and consumption imports will ease appreciation pressures on the taka in the near term, enhancing its export competitiveness, according to the BB.
Letter of credit settlement data from the central bank shows capital machinery imports increased 14.75 percent year-on-year in the first six months.
On the other hand, LC opening data shows capital machinery imports are expected to increase in the near future by 28.98 percent. With the rise in imports, the taka is also being devalued against the dollar, while it was slowly appreciating in recent times.
The inter-bank exchange rate was Tk 78.5 against a dollar on January 21; it was Tk 77.8 a year back.
“Recent economic indicators point toward a solid growth momentum in FY16,” said BB Governor Atiur Rahman.
Exports are picking up despite a challenging external environment, capital machinery import grew robustly in recent months and private sector credit growth rose to 13.7 percent in November up from 13.2 percent in the last MPS in June and supplemented by strong private sector external borrowing, he said.
Releasing the MPS last month, Rahman said interest rates have declined, with spreads now at less than 5 percent.
Incorporating both domestic and external developments, the central bank projects that economic growth could reach 7 percent this fiscal year if political stability continues.
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