Trade deficit falls by 73pc in JulyAKM Zamir Uddin
The country’s trade deficit declined to $129 million in July, the first month of the current fiscal year 2013-14, from $476 million in the same month of the FY 2012-13 because of decreased imports of industrial raw materials, capital machinery and intermediary goods.
Bangladesh Bank officials told New Age on Thursday that the reasons for the narrowed trade deficit were the rise in exports and the drop in imports.
They said that the narrowed trade gap would not put any positive impact on the country’s macro-economic situation if the imports of industrial raw materials, capital machinery and intermediary goods do not increase in the months to come.
According to the BB data to be released today, the trade deficit went down by 72.89 per cent in July of the FY14 from that in the same month of the FY13.
A BB official said that the exports posted a robust growth in the first month of FY14, but the growth of import payments plunged in the period due to a stagnant situation in the investment sector in the country amid political unrest.
The BB data, however, showed that the settlement of letters of credit increased in July due mainly to a rise in imports of food products as the businesspeople moved to build stocks of essential commodities, keeping an eye on the political situation ahead of the next general elections, he said.
The imports registered a 7.94 per cent growth in July of the FY14 compared with that of a 17.60-per cent growth in July of the FY13.
The import payments stood at $3.12 billion in July of the FY14 and it was $2.89 billion in the same month of the FY13.
The country’s export earnings increased by 23.85 per cent in July of the FY14 compared with that of around 4.77 per cent growth in the same month of the FY13.
The export earnings stood at $2.99 billion in first month of the FY14 and it was $2.41 billion during the same month of the FY13.
The BB official said that the increase in import payments in July was a temporary phenomenon as the settlement of letters of credit declined again in August.
He said that the businesspeople were now reluctant to expand their investment by importing required products due to the recent spates of political violence which ultimately posted a narrowed trade deficit in the first month of this fiscal year.
The trade deficit may also decline in the coming months if the existing political unrest persists, he said.
Under the circumstances, the lower trade gap will not put any positive impact on the macro-economic situation, he said.
The BB data showed that the trade deficit had gone down by 24.78 per cent in the FY13 compared with that of a 20.35-per cent growth in the FY12 due mainly to the political violence.
Due to the lower import payment against the higher export growth, and robust amount of inward remittance increased the country’s status of the current account balance in July.
The current account balance increased by 165.49 per cent to $754 million in July of the FY14 from $284 million in the same month of the FY13.
Another BB official said that the large surplus of the current account balance would create a pressure on the macro-economic situation as a big amount of foreign assets had already plunged in a stagnant condition amid lower import.
The country is now enjoying available foreign exchanges which played a role in depreciating the US currency against the local currency taka in last year, he said.
The BB had to purchase record amount of US dollars worth $4.53 billion in the FY13 in a bid to stop its (dollar) depreciation.
The current account balance had also posted a large surplus amounting to $2.52 billion in the FY13 against a deficit figure of $447 million in the FY 2011–12, the BB data showed.
The service sector deficit also decreased by 8.02 per cent to $298 million in July of the FY14 from $324 million in the corresponding month of the FY13.
In July, the country received $244 million from the service sector but it paid foreign sources $542 million.
The net foreign direct investment increased by 8.27 per cent to $144 million in July of the FY14 from that of $133 million in the same period of the FY13.
In July, medium- and long-term loans, however, decreased by 44.02 per cent to $117 million from $209 million in July of the FY13.
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