Foreign trade scenario dismal though deficit narrows down by $2.1b in July-Nov
The country’s trade deficit narrowed down by 30.77 per cent or US$ 2.10 billion in the first five months of this fiscal year (FY) amid dismal foreign trade situation due to the Covid-19 pandemic, officials said.
The overall trade deficit came down to $4.71 billion during the July-November period of FY2020-21 from $ 6.81 billion in the same period of the previous fiscal, according to latest statistics released by the Bangladesh Bank (BB) on Tuesday.
The import growth dropped 8.84 per cent to $ 20.24 billion during the period under review from $ 22.20 billion in the same period of FY’20.
On the other hand, the export earnings grew by 0.86 per cent to $ 15.53 billion in the first five months of FY’21 from $ 15.39 billion a year ago.
“The import expenditure grew at a slower pace than the export earnings,” a BB senior official told the FE, explaining the reason for lower trade deficit.
Talking to the FE, Professor Mustafizur Rahman, distinguished fellow at the CPD, said the present trend of foreign trade might continue in the coming months. “But, this trend is not showing any good signal.”
On the other hand, Khondaker Golam Moazzem, research director of the Centre for Policy Dialogue (CPD), said lower import payment obligations mainly contributed to reduce the trade deficit of the country.
“The country may face a modest widening of the deficit by the end of the current fiscal year,” he predicted.
The low level of trade deficit along with the higher inflow of remittance pushed the current account surplus further up during the period, according to the central bank official.
The current account surplus stood at $ 4.11 billion in the five months of FY ’21, which was a $1.46 billion deficit in the same period of the last fiscal year, the BB data showed. Such surplus was $4.04 billion a month ago.
“The present trend of current account surplus may continue in the coming months too if the existing trend of foreign trade covering both export and import and the flow of inward remittance persist,” the BB official predicted.
Meanwhile, the flow of inward remittances grew by 41.19 per cent to $ 10.89 billion during the period under review from $7.72 billion in the same period of FY ’20 despite the ongoing Covid-19 pandemic.
On the other hand, surplus in the financial account dropped significantly during the July-November period of FY ’21 due to lower inflow of net foreign direct investment (FDI).
The financial account’s surplus came down to $ 949 million during the period under review from $ 1.95 billion in the same period of FY ’20.
“Higher inflow of medium and long-term loans have contributed to keeping the financial account surplus at low level despite the falling trend of FDI,” the central banker explained.
As a result, overall balance of payments (BoP) registered a $5.07 billion surplus in the first five months of FY’21 as compared to a deficit of $307 million in the same period of the previous fiscal.