Balance of payment shows record surplus at $4bn

The country’s overall Balance of Payments (BoP) has marked a record surplus at over $4.1 billion during the July-October period as capital machinery and other import demand dropped amid the Covid-19 pandemic.

The current account balance was in deficit of over $ 1.52 billion and the overall balance of payment was in deficit of $229 million during the July-October period of FY 2019-20.

Economists attributed the surplus BoP to a slow pace in financial activities amid the Covid-19 pandemic. A steady inflow of remittance and a rise in external fund flows also contributed to the surplus, they noted.

Bangladesh Bank’s data show that the country’s trade deficit dropped to $3.23 billion during the July- October period of the current fiscal year from $5.72 billion during the same period a year ago.

Dr. Ahsan H. Mansur, executive director at the Policy Research Institute of Bangladesh (PRI), said, "This is mainly because of slow import".

The BoP summarizes all transactions that a country's individuals, companies, and government bodies make with individuals, companies, and government bodies outside the country.

A BoP surplus means Bangladesh received much more than it spent for the overseas parties, leading to its liquidity buffer, he said.

Bangladesh’s imports fell by nearly 12 per cent during the period compared to the corresponding period a year back.

On the other hand, shipments increased by nearly 3.0 percent during the period over the same period in 2019, meaning the net payment from trade surged during the period.

Dr. Mansur, who once served at the International Monetary Fund (IMF), said there were many other reasons, such as the remittance inflow, behind the BoP surplus.

According to the central bank data, the BoP position reflects a record high final gross international reserve or foreign exchange reserve level of $40 billion-plus in this October.

At this level, Bangladesh Bank has an ample external liquidity buffer, which can cushion the domestic economy against external shocks.

Meanwhile, Bangladesh's overall imports rebounded in September after maintaining a falling trend in two consecutive months, indicating a gradual revamp of the economic activities, officials said.

"It's a good sign for our economy," a senior official of the Bangladesh Bank said while explaining the rising trend in imports.

Higher imports indicate that the country's economy is returning to normalcy, the official added.

Opening of letters of credit (LCs), generally known as import orders, jumped by nearly 54 percent to $4.43 billion in September 2020 from $2.88 billion a month ago, according to the central bank's latest data.

On the other hand, the settlement of LCs, generally known as actual import, in terms of value, rose by more than 18 percent to $3.71 billion in September from $3.13 billion in the previous month.

Md Abdul Halim Chowdhury, managing director and chief executive officer of Pubali Bank Limited, said the country's business activities have almost returned to normalcy.

He expressed fears that Bangladesh's foreign trade covering both export and import might be hampered if the rising trend of infection by Covid-19 is continuing in the United States and the European Union (EU) member countries.

Actual imports through back-to-back LCs of ready-made garment (RMG) products increased by nearly 26 percent to $505.71 million in September from $401.73 million a month ago, according to BB data.

Besides, imports of raw cotton grew by 30.37 percent to $193.87 million in September from $148.03 million in the previous month.