Home ›› 07 Dec 2022 ›› Front
The current account deficit has widened by $.67 billion to $4.5 billion during the July-October period of fiscal year 2023 as there was no significant growth in remittances and export earnings and fall in imports as expected.
The deficit was $3.83 billion during the same period last fiscal year.
The amount of foreign investment, aid and loans and other foreign earnings that was supposed to reduce the current account deficit did not happen. Also, the overall balance deficit reached $4.87 billion due to an increase in the trade credit. The overall balance deficit was just $1.34 billion in the same period of FY’22.
The data have been released in the balance of payments report of the central bank which was published on Tuesday.
Zahid Hussain, former lead economist of the World Bank, Dhaka office, told The Business Post that the increasing deficit of current account and overall balance indicates that the initiatives, taken by the government to reduce import payments in the face of dollar crisis, are not working.
According to the balance of payment (BOP) data, import payment was $25.5 billion and export income was $15.92 billion. The trade gap was $9.58 billion in the July-October period of the current fiscal year while it was $7.54 billion in the same period of the previous fiscal year.
Disagreeing with Zahid Hussain, executive director of Policy Research Institute (PRI) Ahsan H Mansur said, “The deficit we are seeing now is mainly due to the payment of LCs, which were opened in the last quarter of FY’22. As LC openings have recently come down, we expect positive results at the end of this year.”
According to Bangladesh Bank, LC opening during the July-October period decreased slightly to an average of $6 billion, which was $7.55 billion in the last quarter of FY’22.
If the current account deficit continues like July-October, Ahsan H Mansur thinks that the deficit will decrease a lot at the end of the current fiscal year compared to the last fiscal year.
“If we calculate the current account deficit of $4.5 billion in four months, the amount will stand at $13.5 billion at the end of this FY. At the end of the last fiscal year, the deficit was $18.7 billion. This is where $5 billion will be saved,” he continued.
However, analysts believe that it will not be possible to reduce the deficit in the overall balance if remittances and exports are not increased. Export and remittance growth was only 8 per cent and 2.03 per cent respectively during the July-October period of FY’23.
Ahsan H Mansur believes that this deficit will not ease even if foreign investment increases.
“What the government needs to do is bring in budget support from development partners. Imports should be reduced, remittances and exports should be increased, and there is no alternative.”
Mentioning that the country’s overall balance deficit is $4.87 billion during the July-October period, Zahid Hussain said this money has to be paid from reserves. The central bank is still supporting dollar in the money market, so reserves will under more pressure.
According to the BOP data, the reserve position was $35.8 billion in October which may contribute to 5.2-month import payment of goods and services. As of 30 November, the position was $33.80 billion.
If $8 billion is cut from here as per the conditions of the International Monetary Fund (IMF), the usable amount of reserves will be $25 billion.
