Country’s trade deficit has increased by 223 percent in the first quarter of the current fiscal year due mainly to huge increase in food import. Despite strong remittance growth, the current account balance of the country stands at $23 million against strong surpluses of $445 million during the same period of FY2006-07. The balance was $629 million in the fourth quarter of the last fiscal year.
Asked about the huge increase in trade deficit, a Bangladesh Bank (BB) official said, “There was huge increase in import, especially food items, and at the same time export has decreased.” Increased prices of petroleum products and food items in international market have also caused the trade deficit.
The central bank is conducting a study on the possible impacts on the balance of payment for the price increases in global market.
According to the latest issue of the BB Quarterly Report, the total trade deficit in July-September period in 2007-08 is $1,167 million, which was $361 million in the same period of the previous fiscal year.
In the first quarter of FY2006-07, import increased by 17.14 percent whereas food grains import in the same period of this fiscal year has increased by 239.7 percent due to shortfall in domestic production and higher price in the international market.
Import of other food items also increased by 51.6 percent in the same period.
The import growth of food items in the first quarter has been mainly because of sharp increase in imports of milk and cream (55.6 percent), spices (50 percent), edible oil (105.9 percent) and all sorts of pulses (32.4 percent).
Export decreased by 5.5 percent in the same period because of steep decline in readymade garment (RMG) exports.
The BB report said the main reasons for declining RMG export are fewer orders received from buyers during the third quarter of the last fiscal year due to political instability, labour unrest in the RMG sector, and fewer orders received from the European buyers because of an unusually warm winter.
However, the central bank is not much worried about the pressure on the balance of payment as the growth in workers’ remittances is healthy and it hoped the export growth will also bounce back to its trend level.
As per yesterday’s data, country’s foreign currency reserve was $5.16 billion.
Zaid Bakht, research director of Bangladesh Institute of Development Studies (BIDS), said chances are very limited that commodity prices in the global market will decrease immediately. He said the prices are not even stable.
“There are possibilities for more price increase of commodities in global market in near future,” Bakht said, adding, “I do not see any hope that our import expenditure will decrease.”
He said, “The current import expenditure is increasing mainly due to import of food items. But import expenditure for non-food items will see an increase once the country’s economic situation improves from the present sluggishness.”
Asked about the central bank’s optimism about increase in export, Bakht said all uncertainties are there about the increase in export as it is very difficult to regain the RMG market.
Referring to the damage of shrimp sector in the southwestern region in the recent cyclone, Zaid Bakht said this will also affect the overall export earnings.
