Trade deficit narrows 9pc | The Daily Star
12:00 AM, May 14, 2019 / LAST MODIFIED: 12:33 AM, May 14, 2019

Trade deficit narrows 9pc

Trade deficit fell 9.24 percent year-on-year to $11.92 billion in the first nine months of the current fiscal year, giving some breathing space to the government in managing the economy.

A steady growth of exports against a slowdown in imports narrowed the trade gap between July and March.

“This indication is good for the economy,” said Ahsan H Mansur, executive director of the Policy Research Institute of Bangladesh.

“But we are still in a bad state of affairs in terms of earnings from exports and the volume of foreign exchange reserve.”

Exports are on the rise but yet to enter an impressive zone.

Merchandise exports fetched $30.43 billion in the nine months, up 12.09 percent year-on-year. Imports rose 5.13 percent to $42.36 billion, according to data from the central bank.

There is no scope to curb imports, considering the implementation of large infrastructural projects along with ensuring uninterrupted production by the industrial sector, said Mansur, also a former economist of the International Monetary Fund.

But many banks are in crisis to open fresh letters of credit because of shortage of foreign exchange, he said.

“This is not impressive for the banking sector at all. And the central bank still controls the foreign exchange market bypassing the structure of the open market economy,” he said.

According to the economist, the market should be given power to determine the exchange rate between the taka and foreign currencies. This will help lessen the ongoing volatility in the foreign exchange market, he said.

On May 12, the interbank exchange rate stood at Tk 84.50 per USD, up from 83.10 a year earlier.

The narrowed trade gap also squeezed the current account deficit, which stood at $4.23 billion in the nine months, down 34.67 percent year-on-year.

Despite the downward movement of the current account deficit, the authorities are still not in a contented mood as the trend hinted that the gap will be as much as $7 billion at the end of the fiscal year, Mansur said.

As of March, foreign exchange reserves stood at $31.75 billion, down from $32.40 billion a year earlier. The reserves are able to settle import payments for 5.3 months, down from 5.4 months a month earlier and 5.8 months a year ago.

If the downward trend persists, the import coverage by the reserves will fall below three months, Mansur said.

“Ensuring a robust growth of exports will give a sustainable reserve, which will also help increase the import coverage.”

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