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SAM

Published:
2018-05-16 11:46:54 BdST

Current account deficit crosses $7.0b in 9 months of FY '18


FT ONLINE

The country's current account deficit widened, reaching a record high in the first nine months of the current fiscal year (FY) as imports grew faster than exports.

Central bank statistics, released on Tuesday, showed that the current account deficit hit $7.08 billion in July-March period of the fiscal 2018.

The amount of deficit is the highest in the country's history, which was only $1.37 billion in the same period of the past fiscal year.

The increasing gap in both the merchandise and service trades of the country is pushing the current account deficit higher.

The Bangladesh Bank data showed that the country's merchandise trade gap with the rest of the world exceeded $13 billion in the first nine months of the current fiscal year.

The deficit in merchandise trade stood at $13.20 billion in July-March period of FY18, which was $7.04 billion in the same period of the past fiscal year.

Trade deficit registered an 87.5 per cent growth in the nine months to March.

The Bangladesh Bank said that exports have recorded around 7.0 per cent growth in the first nine months of the current fiscal year, while imports surged by 24.50 per cent in the same period.

The considerable jump in imports over the moderate increase in exports has driven up the trade gap.

"Import growth is unsustainably high against the lacklustre growth in exports and so the trade gap is rising fast," said Dr Ahsan H. Mansur, executive director at the Policy Research Institute of Bangladesh, a Dhaka-based think-tank.

He also said that while remittances are growing, the inflow remains the same level as was in 2016.

The soaring gap in trade as well as the current account reflects the growing imbalance of the country's external account, thus creating mounting pressure on the overall balance of payments.

The central bank data showed that the overall balance of payments has posted a negative balance of $1.40 billion in the first nine months of the current fiscal year against a positive balance of $2.60 billion in the same period of the last fiscal.

To make the connection, Dr Mansur argued that the country is accumulating foreign debt both in the public and private sectors and a portion of debt is likely to be used for financing the current account deficit.

Dr Mansur was of the view that the government is heavily relying on debt financing to construct the mega infrastructure projects.

"This is unsustainable and going to put the economy under serious strain in the near future," he warned.

He suggested that the government opt for equity financing for different big infrastructure projects, meaning attracting Foreign Direct Investment (FDI) in these projects.

But the country does not fare well in attracting FDI.

The central bank statistics showed that the net inflow of FDI fell by 2.89 per cent to $ 1.36 billion in the first nine months of the current fiscal year, down from $ 1.41 billion in the same period of the last fiscal.

Dr Mansur, a former senior executive of the International Monetary Fund, also underlined the need for right pricing and timely implementation of the projects so that costs could not rise abnormally.

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