Soaring import cost widens trade deficit

In spite of the country’s steady growth of export earnings for the last few years, the existing trade deficit is not coming down as import expenditure is going up. Analysts say import expenditure is increasing remarkably because of the continuous import of equipment for the ongoing mega projects, and that is why it is not being possible to narrow the trade deficit in spite of the export growth.

A recent report of Bangladesh Bank shows that the trade deficit in the fiscal 2018-19 stood at Tk 13,16,990 crore which is comparatively less than 17.33 percent of the previous FY 2017-18, but again 63.58 percent more than that of the FY 2016-17. The country imported goods worth $ 5,543.90 crore (55.44 Billion) in FY 2018-19 while during the same period the country earned $ 3,994.50 crore (39.94 billion).

As per the account, total trade deficit stands at $ 1,549.40 crore, on the other hand the service trade deficit stands at $ 371.50 crore. During the FY 2017-18 the deficit was $ 420 crore. Last year the country could attract Foreign Direct Investment (FDI) of a total of $ 450.10 crore and during the same period of the previous year it was $ 329 crore.

The account suggests that the flow of FDI increased by 36.81 percent last year. In 2018-19 the country saw net increase of FDI flow by 42.86 percent. Analysts also opine that the private sector investment needs to be increased significantly since the country’s investment sees no remarkable growth.

Meanwhile the 3rd quarter economic review of metropolitan Chamber of Commerce and Industries (MCCI) suggests that the overall trade deficit narrowed by 8.43 percent in July-February of 2019, because of a steady growth of exports and a slowdown in imports during the period.

The deficit in trade in services, too, shrank year-on-year by 0.94 percent in the same period. Lower trade and services deficit led to a significant improvement in the current account balance during July-February of 2019. The current-account deficit narrowed to US$ 4.27 billion during the period under review from US$ 5.899 billion in the corresponding period of the previous fiscal.

The financial account surplus had, however, shrunken by 30.75 per cent from US$ 5.376 billion to US$ 3.723 billion during the said period, despite an increasing trend in net FDI. Due to a significant improvement in the current account balance, the deficit in the overall balance improved to US$ 499 million in July-February of 2019 from a deficit of US$ 978 million during the corresponding months of 2018.