Trade deficit drops 29% as imports fall

Bangladesh’s trade deficit decreased by 29 per cent year-on-year in the first seven months of FY23 as import payments declined against growing export receipts.

Between July and January of this fiscal year, trade deficit stood at $13.38 billion, down from $18.81 billion in the same period of the last financial year, as per the Bangladesh Bank data.

Industry insiders said deficit dropped mainly due to the falling trend in import payments.

Import payments fell because of the austerity measures taken by the government and the central bank to tackle the foreign exchange reserve crisis, which is deepening, they added.

Import payments fell by 5.66 per cent to $44.03 billion during the first seven months of FY23 while export earnings grew by 9.98 per cent.

In July last year, the central bank imposed a 100 per cent letter of credit (LC) margin on the import of luxury and nonessential items.

In the same month, the regulator asked banks to inform it 24 hours before opening LCs amounting to $3 million or above as part of its austerity measures.

Commercial bank officials said imports declined in recent months as banks had been refusing to open LCs for importing raw materials and other products due to the severe dollar crisis.

Export earnings stood at $30.64 billion from July to January of this fiscal year, up from $27.86 billion in the same period of FY22. Sparrow Group Managing Director Shovon Islam said, “Export figures seem high because orders were taken three to four months ago. But the existing orders are not up to the mark due to the ongoing global economic crisis.”

The readymade garment sector will be in a tough spot for the next six to nine months, he said. The country’s current account deficit declined to $5.03 billion from the deficit balance of $10.26 billion, as per the central bank data.

Officials at the Bangladesh Bank said growing export earnings and slowed import payments will reduce the pressure on the country’s foreign exchange reserves. Gross forex reserves stood at $32.3 billion on March 2 this year, but usable reserves were $25 billion, as per the central bank data.

Gross forex reserves reached the record highest of $48 billion in August 2021.