Trade deficit more than trebles

The trade deficit widened more than three times to $1.81 billion in the first two months of the fiscal year on the back of a surge in imports and a decline in exports.

“The import growth has been too high so far this fiscal year,” said Ahsan H Mansur, executive director of Policy Research Institute, a private think-tank.

During the July-August period of the fiscal year, imports soared about 34 percent to $8.35 billion, according to data from the Bangladesh Bank.

“This is not sustainable as it has abnormally pushed the private sector credit growth.”

On the other hand, export receipts did not increase in line with import bills during the period, Mansur said.

Exports soared 13.92 percent to $6.63 billion during the period, according to data from the Export Promotion Bureau.

The current account balance registered a deficit of $451 million in the first two months of the fiscal year, in contrast to a surplus of $812 million a year earlier.

The downwardly sticky remittance figures and the negative trade balance account are to blame.

Remittance is a major source of foreign currency for Bangladesh and its descent since fiscal 2015-16 has progressively become a matter of concern for the government.

But in recent times the government and the central bank various steps that contributed to a jump in inflows.

Remittance increased 15.81 percent to $2.53 bullion in the first two months of fiscal 2017-18, according to central bank statistics.

The country will have to manage its current account deficit by exhausting its foreign exchange reserves, which would not bring any good for the economy, said AB Mirza Azizul Islam, an advisor to a former caretaker government.

Taka will depreciate more against the US dollar if the current account continues to maintain the large deficit.

“Such a deprecating trend will slightly help exporters but fuel inflation,” Islam said. 

Subsequently, at the end of August, the overall balance was $206 million in the negative in contrast to $1.17 billion in the surplus a year earlier.