Current account balance posts $2.52b amid low investmentAKM Zamir Uddin
The country’s current account balance posted a large surplus amounting to $2.52 billion in the recently concluded financial year against a deficit figure of $447 million in the FY 2011–12, according to Bangladesh Bank data.
Economists and BB officials told New Age on Monday that the large surplus of the current account balance would put an adverse impact on the country’s macro-economic situation as business sector was now passing a stagnant condition amid a lower import growth in the capital machinery and industrial raw materials in the FY13.
The current account balance, which deals with components such as export receipts and net earnings in services, including remittances, and import payments and profit repatriation by multinationals and local people, was also highest in the last three financial years, as the balance was $995 million in the FY11.
Any country needs to take loan if its current account balance registers a deficit figure, a BB official said.
For this reasons, the surplus balance of the current account is considered positive for any country, he explained.
Bangladesh Institute of Development Studies research director Zaid Bakht told New Age that the surge in the current account balance was due to rise in an increased trend in remittances and fall in imports.
Such type of surge in the economy is not always desirable especially for a country like Bangladesh which is highly dependent on imports for productive sectors, he said.
The large surplus of the current account balance will create a pressure on the macro-economic situation as a big amount of foreign asset has plunged in a stagnant condition amid lower import, Bakht said.
The country is now enjoying available foreign exchanges which have already depreciated the US currency dollar against the local currency taka, he said.
The depreciated trend in the dollar usually discourages the exporters and expatriates Bangladeshis to send remittance more to the country, Bakht said.
Under the circumstance, the BB is now purchasing the dollar from the local market in a bid to stop its (dollar) depreciating trend, he said.
Bakht feared that such type of purchasing tendency of the BB would push up inflation in the consumer market, as the currency supply would increase in the market in the process.
The BB record book showed that the central bank had bought the highest amount of dollar worth $4.53 billion in the FY13 since the FY05.
The BB also purchased dollar worth $576 million in the current financial year between July 1 and August 11.
The lower import growth of the industrial raw materials and capital machinery has already hit the country’s GDP growth in the FY13, Bakht said.
According to the Bangladesh Bureau of Statistics, the GDP growth of the country declined to 6.03 per cent in the FY13, much below the government’s target of 7.2 per cent.
The higher export earnings and lower import payments in the FY13 played a significant role in the large surplus of the current account balance, another BB official said.
The BB data showed that the import payment had stood at $33.57 billion in the FY13 against $33.30 billion in the FY12.
The export earnings stood at $26.56 billion in the FY13 against $23.98 billion in the FY12.
The higher remittance inflow in the FY13 has also put a positive impact on the current account balance.
The remittance inflow to the country increased by 12.59 per cent to Tk 14.46 billion in the FY13 compared with that of the previous financial year when the expatriate Bangladeshis had remitted $12.84 billion.
Former interim government adviser AB Mirza Azizul Islam told New Age that the large surplus of the current account balance in the FY13 had showed that the country’s investment sector was now passing a stagnant condition.
For this reason, the large surplus will not bring much positive impact on the economy, he said.
Due to the dull situation in the business sector, the country’s trade deficit decreased significantly in the FY13, he said.
The country’s trade deficit declined to $7.01 billion in the FY13 from $9.32 billion recorded in the FY12.
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