Trade deficit widens by 27.66%

The country’s trade deficit has widened to $22.8 billion in the just-concluded 2020-21 fiscal year as import spending rose more than export earnings, indicating a sluggish trend in the economy due to the pandemic.

According to the latest data from the Bangladesh Bank (BB), the deficit rose by $4.94 billion or 27.66 per cent year-on-year to $22.8 billion in FY 2020-21 from $17.85 billion in the previous FY.

Export growth rose by 15.38 per cent to $37.88 billion in FY21 from $32.83 billion in the previous FY. Import growth rose by 19.71 per cent to $60.68 billion from $50.69 billion.

“Import growth rose because spending on imports increases than the volume of imports, which is not a sign of economic recovery,” said Zahid Hussain, former lead economist of the World Bank, Bangladesh.

He said that import spending has increased due to the rising trend of

commodity prices in the international market.

The price rise of imported goods in the international market will also affect the domestic market, making it difficult to control the inflation rate, he said.

BB data showed that the negative balance in the current account stood at $3.8 billion in FY21, which was at $4.72 billion in the previous FY.

The trade deficit will increase in the coming months as the commodity prices in the international market will not decrease in the coming days, said the economist adding that the economic situation of our country will not be as bad as last year unless the delta variant of the coronavirus becomes rampant.

Zahid said that the economic recovery of our country depends on Covid management. China, Europe, America have brought it under control because their Covid management is much better.

According to the central bank projection on its monetary policy, Bangladesh’s trade deficit with the rest of the world is expected to rise to $26.07 billion in FY22.

“The increasing trend of foreign exchange reserve will not sustain in the upcoming days as the spending of import will increase in the coming days so the central bank should be cautious to lending from the reserve.”

As per the BB data, the country’s forex reserve stood at $45 billion as of July 28.

Zahid said there would be more pressure on foreign exchange reserves soon; however, the reserve is good enough to settle import payments for seven months.