Current account deficit hits $2.1b

The country's current account deficit hit $2.1 billion in the first 11 months of the just concluded fiscal year due to sluggish export earnings and higher import payments.

This is an about-face from 2015-16 when the current account was in surplus of $3.19 billion.

In fact the current account balance set foot into the negative territory for the first time in four years in the first quarter of 2016-17 when the deficit stood at $504 million. It has been on the rise since. The last time the current account was in the deficit was way back in 2011-12.

The trade deficit also widened 42.58 percent year-on-year to $9.19 billion during the 11-month period.

The widening of the current account deficit is still not a matter of concern, said a senior executive of Bangladesh Bank.

He said the existing deficit is less than 1 percent of gross domestic product whereas a country is allowed to run a deficit of up to 2-3 percent of GDP.

The central bank official, however, said the rising trade deficit could put a little pressure on the exchange rates.

The current account deficit has already affected the exchange rate as the taka depreciated against the dollar.

The exchange rate of the American greenback was Tk 80.60 per USD yesterday, up from Tk 79 in April, the central bank data shows.

Exports only grew by 1.69 percent in the just concluded fiscal year. A massive drop in the shipment of garment items is blamed for the below-than-expected export earnings of $34.83 billion.

On the other hand, imports rose 10.68 percent to $40.25 billion in the July-May period compared to $36.37 billion in the same period a year ago.

The slowdown in remittance is also responsible for the current account deficit.

Remittance inflow in 2016-17 was the lowest in six years, declining 14.47 percent year-on-year to $12.77 billion.

Thanks to the slowing exports and remittance and the rise in imports, the foreign exchange reserves decreased to $32.40 billion on July 5, which was $33.39 billion in June, according to the central bank.