Trade gap exceeds $28bn in Jul-May FY22

Bangladesh’s trade gap crossed $28 billion in the July-May period of FY 2021-22 due to the increase in domestic demand, upward trend of commodity prices across the globe, and continued depreciation of Taka against the US dollar.

According to Bangladesh Bank sources, the country’s import payment (f.o.b) stood at $75.40 billion during this period, while the export earnings were only $47.17 billion – indicating a trade gap of $28.23 billion. This figure was $27.57 billion in the July-April period of FY22.

Besides, during the July-May period, wage earners’ remittance inflow declined by 16 per cent to $19.21 billion, compared to the same period of last FY.

The current account balance deficit also widened by around $2 billion and reached $17.23 billion in the July-May period of FY22, which was $15.31 billion in the July-April period of the same FY.

Commenting on the issue, former lead economist of the World Bank Dhaka Office Zahid Hussain said, “The reasons that caused the import costs to rise still persist to this day, and will not go away suddenly.

“So the current account balance deficit will widen further. There are no alternatives to stabilising the exchange rate at the moment.”

Although the Bangladesh Bank fixed the exchange rate Tk 89 at the end of May, it withdrew the decision following objections from bankers. Later, the central bank introduced a free float exchange rate, but the USD price increased abnormally within just a day.

Zahid Hussain said on the matter, “The exchange rate must be set at free float, but this can suddenly increase the price of USD by a lot. The central bank has to patiently observe the situation and intervene in the market when needed.

“The USD support from the reserves will put more pressure on the economy.”

In the just concluded FY22, the Bangladesh Bank provided $7.6 billion in support to help keep the USD stable, which reduced its reserves to $41.87 billion on June 30. The reserves were $48 billion in August last year. The official rate of the USD is at present Tk 93.45.

Meanwhile, data from the central bank showed that import payment declined slightly from $7.77 billion in January to $6.73 billion in May. Initiatives were taken to reduce imports, including reducing LC margins and restricting foreign travel of government and private officials.

When asked why the import expenditure came down in May, Zahid Hossain said, “A number of initiatives were taken in May, so the results will come after one or two months. Imports may have slightly declined in May for some other reason.”