Trade deficit narrows on growing exports

Bangladesh’s trade deficit narrowed by 6.42 per cent year-on-year to 11.79 billion in the first five months of ongoing FY, made possible by a slower import growth compared to export growth.

The deficit fell by $809 million during the July-November period of FY23, show latest data from the central bank. The trade deficit stood at $12.60 billion during the same period last fiscal year.

This figure fell slightly due to slow import growth and higher export earnings, say industry insiders.

During July-November of FY23, import payments rose by 4.41 per cent to $32.53 billion, when compared year-on-year. On the other hand, the country’s export earnings grew 11.75 per cent to $20.74 billion in the first five months of this fiscal year, show central bank data.

The import growth slowed down following a number of measures aimed at curbing imports amid the ongoing pressure on forex reserves.

Commenting on the matter, former lead economist of World Bank Dhaka office Zahid Hussain said, “The opening of LCs did not come down as expected despite austerity measures taken by the government, which is very concerning.

“If this happened while importing essential commodities and oil, then it is alright, but if this happened because of the imports of luxury or non-productive goods, then it is bad news.”

In July this year, the central bank had imposed a 100 per cent LC margin against the import of luxury and nonessential items. The same month, the regulator asked banks to inform it 24 hours before opening an LC worth $3 million or above as part of its austerity measures.

Bangladesh Garment Manufacturers and Exporters Association (BGMEA) President Faruque Hassan said the export earnings increased because they launched apparel diplomacy and met global stakeholders amid the Covid-19 pandemic.

“We explored new markets and buyers, especially in the Middle East and North America, which impacted the growth,” he added.

Exporters are optimistic that the country’s export earnings would grow further due to recent initiatives taken by Association of Bankers, Bangladesh (ABB) and Bangladesh Foreign Exchange Dealers Association (BAFEDA).

Exporters now are getting Tk102 against per USD to repatriate their export income as the ABB and BAFEDA announced the new greenback rate for exporters effective from Monday. The current account balance registered an improvement with the falling trade deficit, insiders say.

The negative current account balance declined to $5.6 billion in July-November of this FY from negative $6.2 billion a year ago, according to the Bangladesh Bank data.

Bangladesh Bank officials said the growing export earnings and slowed import payment will reduce the pressure on the country’s foreign exchange reserves.

The country’s gross forex reserves stood at $33.83 billion on December 28 this year, but the usable reserves were $25.71 billion, as per the central bank data.

The gross forex reserves reached the record highest at $48 billion in August last year.