Deficit in the current account balance has declined significantly in the first seven months of the current fiscal year (FY), 2019-20, on the back of shrinking merchandise trade gap.
Bangladesh's trade deficit narrowed down by 2.33 per cent or US$230 million during the period under review, as both export and import growth fell, indicating a 'sluggish trend' in the economy.
"The trade deficit may shrink further in the coming months because of the falling trend in import growth, which is expected to continue due to coronavirus outbreak in different countries of the world," a senior central banker told the FE.
The overall trade deficit came down to $9.64 billion during the July-January period of FY '20 from $9.87 billion in the same period of the previous fiscal, according to the latest data released by the Bangladesh Bank (BB) on Sunday.
The export growth fell by 5.31 per cent to $ 22.36 billion during the period under review from $ 23.61 billion in the same period of FY '19 while the import growth dropped by 4.43 per cent to $32.00 billion from $33.49 billion.
Lower trade deficit coupled with higher inflow of remittance pushed down the current account deficit during the period under review, according to the BB official.
The current account deficit stood at $1.52 billion in the seven months of the current fiscal year, down from $4.04 billion in the same period of the last fiscal year, the BB data show.
The central banker expected that overall deficit in the current account balance would improve further in the coming months if the existing trend of foreign trade and the flow of inward remittance continue.
Meanwhile, the flow of inward remittances grew by 21.48 per cent to $11.05 billion during the period under review from $9.09 billion in the same period of FY '19 on the back of incentives being provided by the government.
The government had already allocated Tk 30.60 billion as incentive in the budget for FY '20 to encourage expatriate workers to send their money through legal channels.
Talking to the FE, Kazi Sayedur Rahman, executive director of the BB, said earlier that the inflow of remittances may cross $20 billion-mark by the end of FY '20.
The financial account maintained a modest surplus of $2.15 billion in the July-January period of FY '20. There was, however, a surplus of $3.67 billion in the same period of the last fiscal.
A modest increase in the net inflow of foreign direct investment (FDI) and a decline in medium- and long-term loans contributed to keeping the financial account surplus at low level, the officials explained.
As a result, the overall balance of payments (BoP) registered a $132 million surplus in the first seven months of this fiscal, as against a deficit of $975 million in the same period of last fiscal.
"Aid utilisation and efforts to attract more FDI should be strengthened to improve the overall BoP," Dr. Mustafizur Rahman, distinguished fellow of the Centre for Policy Dialogue (CPD), told the FE.
The senior economist also urged the policymakers to take effective measures to sustain the existing high inflow of remittances in the coming months.
"The policymakers should also focus on increasing the export earnings, which saw a decline of nearly 5.0 per cent in the first eight months of this fiscal," Dr. Rahman noted.
