Current account deficit crosses $5b

Bangladesh's current account deficit reached a 15-year high of $5.34 billion in the first seven months of the fiscal year as the country's capacity to export is failing to keep up with the appetite for imports.

At this point last fiscal year, the deficit was $890 million.

The current account deficit has already weakened the exchange rate of the local currency against the US dollar, said AB Mirza Azizul Islam, a former finance adviser to the caretaker government.

On Thursday, the interbank exchange rate was Tk 82.96 per dollar, up from Tk 79.65 a year earlier, according to central bank statistics.

The dollar will appreciate further if the widening trend of current account is not halted in the months to come, he said.

"Production cost will increase automatically due to the appreciating trend of the greenback as the country has to import large amounts of industrial raw materials to produce essential goods."

Higher production costs will fuel inflation, which, in turn, will have an adverse impact on the spending capacity of consumers, he said.

Islam went on to urge the government and the central bank to take measures to boost export earnings in a bid to squeeze the large current account deficit.

A good flow of remittance will also play a key role in containing the current account deficit, he said.

In the first eight months of the fiscal 2017-18, remittance posted 16.55 percent growth from a year earlier, but it is not sufficient, he said.

Remittance in fiscal 2016-17 was the lowest in six years: migrant workers sent home $12.77 billion, down 14.47 percent year-on-year.

Trade deficit also widened 92.17 percent year-on-year to $10.12 billion in the first seven months of the fiscal year, according to data from the Bangladesh Bank.

The government should take immediate measures to boost export earnings in order to narrow both the trade deficit and the current account, a BB official said.