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Trade deficit widens

Rising imports, falling remittance are major factors
Mehedi Hasan
09 Dec 2021 00:00:00 | Update: 09 Dec 2021 00:45:46
Trade deficit widens

Bangladesh’s trade deficit has widened to $9.09 billion in the July-October period of the current fiscal year as increased commodity prices in the global market pushed up import spending that exceeded export earnings.

According to Bangladesh Bank (BB) data, the deficit rose by $5.6 billion or 160.26 per cent year-on-year to $9.09 billion in the first four months of FY21-22 from $3.49 billion in the same period of the previous FY.

Export growth rose by 20.45 per cent to $14.8 billion in the four months of this FY from $12.28 billion in the same period of the previous FY.

Export earnings from the garment sector increased 20.78 per cent year-on-year to $12.62 billion in the July-October period.

On the other hand, import growth rose by 51.42 per cent to $23.9 billion from $15.78 billion, BB data showed. Import payment for intermediate goods rose by 66.87 per cent to $2.02 billion during the July-October period. 

Trade deficit has increased sharply due mainly to the increasing trend of import payment, said Salehuddin Ahmed, former central bank governor.

He said that import volume and cost have increased after the Covid-19 pandemic.

Import volume increased on the reopening of the economy and at the same time, import cost rose due to the rising trend of commodity prices in the international market, Ahmed explained. 

He said that US dollar rates against taka are increasing day by day due to the rising trend of import payment. 

As of yesterday, inter-bank exchange rates stood at Tk 85.80 per dollar, up from Tk 84.80 four months ago. 

Zahid Hussain, a former lead economist at the World Bank’s Dhaka office, agreed with Ahmed. He said that import spending has increased due to the rising commodity prices in the global market. 

He said that the price rise of imported goods in the international market would also affect the domestic market, making it difficult to control the inflation rate.

BB data showed that the negative balance in the current account stood at $4.76 billion in the four months of this fiscal year, which was at $3.63 billion in the same period of the previous fiscal year. 

Ahmed said that the falling trend of remittance impacted the current account balance. He noted that the forex reserve is falling due to the lower tendency of remittance and increasing import spending. 

As of November 25, the forex reserve stood at $44.94 billion, which was at $46.49 billion as of October 31 this year. 

Hussain said there would be more pressure on foreign exchange reserves soon. However, the reserve is good enough to settle import payments for eight to nine months. 

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