Home ›› 08 Apr 2022 ›› Front
The current account deficit of Bangladesh hit an all-time high of $ 12 billion in first eight months of this fiscal due to rise in trade deficit and declining trend of remittance.
In July-February period of Fiscal Year 2021-22, the trade deficit stood at $22.31 billion, which was $12.36 billion in the same period a year
ago, according to the Bangladesh Banks’ Balance of Payments (BOP) monthly data.
In the same period of FY22, the import payment increased by 46.70 per cent to $ 54.37 billion, which was all time high in the country’s history.
In the same period of the previous financial year the payment amount was $ 37.06 billion.
The Ukraine-Russia war and the ease of pandemic helped the economy rebound that pushed Bangladesh to spend more on the import payment.
Executive director of Policy Research Institute Ahsan H Masur told The Business Post that, “We are heading towards an uncomfortable situation. This should not be allowed to continue. Imports have to be reined in right now.”
He said it is also necessary to check whether money is being laundered against imports that can be reduced by appreciating the taka against the dollar. In addition, projects that are heavily dependent on imports need to be slowed down.
According to the BOP data, in July-Feb period of FY22, export growth was 30 per cent and the total export income exceeded $ 32 billion, but in the same period remittance inflow declined by 19.46 per cent to $ 13.44 billion.
As a result, the current account balance deficit increased more than $2 billion in just one month. According to the central Bank data, the current account deficit during July-Jan period was $ 10.19 billion, which reached $ 12.83 billion in July-Feb.
In July-February of last year, current account balance was surplus $825 million.
In the same period, the overall balance of payment (BOP) stood at negative $ 2.22 billion, which had a surplus of $ 6.88 billion in the same period over the previous financial year.
The widening deficit keeps exerting pressure on foreign exchange reserves. The central bank’s BOP statement showed that the July-Feb reserve was $ 45.95 billion, which could settle 5.1 months of import payment.
The import payment pressure is causing the reserve amount to decline, thereby shooting up the dollar exchange rate, and creating a macro economic pressure for Bangladesh.
Ahsan Manur said the government should be cautious about the country’s foreign debt.
“Foreign loan that the government is taking should be reduced and such loans in the private sector need to be closely monitored,” he suggested.
The US Federal Reserve increased interest rates and the private sector loans need to be recovered faster to invest in US bonds. Notable that at the end of December last year, the country’s total external debt increased by $ 20 billion to $ 90.79 billion compared to what was in the same period a year ago.
Of the amount, foreign debt in the public sector increased by $ 12 billion and in the private sector by $ 8 billion.
According to the BOP data, net foreign direct investment (FDI) was looking good for the first eight months of the current financial year.
The FDI was $ 1.16 billion, which was 11.65 per cent higher than the same period of the previous financial year. In July-Feb period of FY21, net FDI was $ 1.04 billion.
Besides, investment by the non-resident Bangladeshis declined by 52.8 per cent for the July-Feb period of the current financial year.
The investment amount was $ 76 million, which was $ 161 million for the same period of the previous fiscal.
