Trade deficit continues to narrow

Trade deficit narrowed 6.33 percent in the first 11 months of the outgoing fiscal year as export growth surpassed that of import.

Between July last year and May this year, trade deficit stood at $6.27 billion in contrast to $6.69 billion a year earlier, according to Bangladesh Bank's balance of payments data.

In the first ten months of fiscal 2015-16, exports grew 8.01 percent and imports 5.22 percent, which had the effect of slightly squeezing the trade deficit.

Though the country's garment sector suffers from an image crisis regarding the working conditions, its exports appear to be going from strength to strength.

In the first 11 months of the fiscal year, garment exports grew 9.42 percent -- a development that tilted the trade balance in Bangladesh's favour.

Among the main export markets, the country's exports to both the US and Europe soared, said Finance Minister AMA Muhith in his budget speech. The reason for the slow import growth is the lack of investment appetite.

In the first 11 months of fiscal 2015-16, capital machinery imports increased 12.87 percent, down from 20.76 percent recorded a year earlier, according to letters of credit settlement statistics.

Industrial raw material imports during the same period increased only 2.61 percent, which was 3.52 percent a year earlier.

Not only industry-related items, the imports of other goods like food and petroleum have declined.

Food grain imports in the first 11 months of the fiscal year plummeted 26.34 percent and petroleum 28.90 percent, according to LC settlement statistics.

On the back of the reduced trade deficit, the balance of payments surplus widened about 14.88 percent during the period.

At the end of May, the overall surplus stood at $4.12 billion in contrast to $3.59 billion a year earlier, according to central bank statistics.

One of the reasons for the increase in overall surplus this year is that the net credit is in favour of Bangladesh, said BB officials.

The net trade credit in the first 11 months of fiscal 2015-16 stood at $1.72 billion in the negative, down from $1.98 billion in the negative a year earlier.

The officials said the customers made less deferred payment against imports, as a result of which the negative trade credit dropped this year.

Another reason for the increase in surplus is that the net foreign direct investment soared. During the July-May period, foreign direct investment swelled 12.35 percent to $1.87 billion from a year earlier.

As the overall balance increased, so did the foreign currency reserves.

On June 29, the foreign currency reserves stood at $30.16 billion, up 21.54 percent from a year earlier.

For an economy, reserves equivalent to 5-6 months' import bill are adequate, whereas Bangladesh has reserves equivalent to around eight months' import bills now.

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