Six billion dollars trade deficit in first six months!

Staff Correspondent,
Photo: Collected

Photo: Collected

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In the first six months of the current financial year (July to December 2020), Bangladesh has a trade deficit of 646 crore 50 lakh dollar. The deficit at this time last year was 822 crore dollar. However, despite the widening trade deficit, the pressure has eased as compared to the previous financial year as Bangladesh's transaction situation with the outside world has improved.

This information has come up in the updated report on the current balance of payments of Bangladesh Bank.

Speaking about the trade deficit, former Central Bank governor Dr. Salehuddin Ahmed said, "The trade deficit depends on the balance of imports and exports." Due to the pandemic, imports and exports have not been as fast in the last six months. But the trade deficit has narrowed as remittance inflows have increased and fuel oil prices have fallen in the global market. It is positive in the current situation. However, the world market is not normal yet.

He added, "Increasing exports will be a challenge in the future because new investments are not happening. Production in many industrial plants has declined. Some have stopped. As a result, imports of capital equipment and other industrial raw materials have declined significantly. It's very worrying. "

According to the Central Bank's Balance of Payments, in the first six months of the 2020-21 fiscal year, Bangladesh earned 1876 crore 10 lakh in the export sector, including EPZs. In contrast, it has spent 2522 crore 60 lakh dollars for imports. As such, the trade deficit in the first six months of the fiscal year stood at 646crore 50 lakh dollar. The deficit in the local currency is Taka 54360 crore.

By exporting goods in the mentioned period, Bangladesh has earned 44 percent less than its previous year. On the other hand, the cost of importing goods has decreased by 6.80 percent over the previous year. The demand for imports was also less as the demand for investment in the country was less. So the import cost has not increased much. However, the trade deficit has narrowed due to strong remittance inflows to the country's expatriates. Remittances increased by about 38 percent in the first six months.

The trade deficit in the services sector is measured by calculating the income and expenditure of insurance, travel, etc. During the Corona period, people traveled less. On the other hand, the cost of insurance has also come down due to lower import-export. As a result, the trade deficit in the service sector has also decreased. During July-December of the current financial year, the deficit of this sector stood at 84 crore 45 lakh dollar. At the same time last fiscal year it was 165 crore 60 lakh  dollar.

The global economic recession in the pandemic had a direct impact on foreign direct investment (FDI). During July-December of the last financial year, Bangladesh received FDI of 168 crore 70 lakh dollar. It has come down to 155 crore dollar in the same period of the current financial year.

The remaining part of the total foreign direct investment (FDI) in various sectors of the country is called net FDI. Net foreign investment also fell by about 22 percent to 45 crore 50 lakh dollar during the period. During the same time last year, net foreign investment was 58 crore 30 lakh dollar.

Even when the global economy is in the throes of a pandemic, one of the indicators of the country's economy is the growing balance of payments in the current account of foreign transactions.

Having a current surplus means that the country does not have to incur any debt in regular transactions. And if there is a deficit, the government has to fill it with a loan. As such, it is better for developing countries to have surpluses. In the first six months of the fiscal year, there is a current surplus of 432 crore 20 lakh dollar. So which was negative at about 167 crore dollar at the same time in the previous fiscal year. Meanwhile, due to the increase in the overall remittance flow, Bangladesh has maintained a balance of more than 615 crore dollar in the balance which was 2crore 70 lakh dollar in the same period of last fiscal year.

The expatriates have sent remittances of 294 crore 50 lakh dollar during the period under review. At the same time last year, they sent 940 crore 80 lakh dollar. The growth has been 37.60 percent.

The flow of foreign investment (portfolio investment) in the stock market is in a negative trend. In the first six months of the last financial year, the investment was 3 crore 70 lakh dollar. At the same time this year, foreign investment (net) in the stock market has gone up by 15 crore 70 lakh dollar.