Foreign investment downs Debt repayment ups

Reserve balancing mismatched

Rabiul Haque: Due to the dollar crisis, Bangladesh Bank has imposed various restrictive conditions on imports. Due to this, the foreign trade deficit has decreased slightly. However, there is a big deficit in the country’s overall transactions with the outside world.
Those concerned said that this situation has arisen due to a large deficit in terms of finances. Apart from this, remittance and export earnings did not increase as expected. Also, foreign investment has decreased. On the other hand, disinvestment has increased. Due to these reasons, there has been a shortfall in foreign commercial loans. In the last financial year, there was a deficit of $822 million in overall transactions. In the previous financial year, this deficit was $665 million.
Meanwhile, foreign debt repayment has increased. As a result, the reserves are decreasing. This information has been published in Bangladesh Bank’s current account balance of foreign transactions (Balance of Payment) updated report.
Those concerned say that imports are more than exports, the prices of all kinds of products including energy are on the rise in the world market, and as expected remittances are not being exported and foreign investments are decreasing, Bangladesh is falling into a trade deficit with the outside world. Therefore, to overcome the dollar crisis, the income of foreign exchange should be increased. There is no alternative.
According to the report, the growth in the two main sectors of foreign exchange earnings has been negligible. But the expense account is getting bigger. As a result, there is a shortage of foreign exchange. Due to this shortage, the price of the dollar is increasing. On the other hand, the foreign exchange reserves are also getting tight.
Although imports have decreased in recent times, outstanding import debt and foreign debt repayments are not meeting the required dollar reserves every month. Currently, the average income is $7 billion per month. On the contrary, $6.5 billion are going to settle the immediate import debt. At least another billion dollars is being spent on debt repayments. According to this, the monthly deficit is $50 million.
Apart from this, various services, royalties, profit repatriation abroad are incurring additional costs.
Foreign Investment Decreases: Foreign Direct Investment (FDI) in the country has decreased. In the last fiscal year 2021-22, Bangladesh received FDI of $463.6 million. In the last financial year, it decreased to $4.5 billion. Net FDI is what is left over from the total foreign direct investment in different sectors of Bangladesh after the profit of the investing company is taken away.
Net foreign investment also declined during the fiscal year in question. This index decreased by 11.82 percent from the previous year to $161 million. The net foreign investment in the previous financial year was $182.7 million.
At the same time, foreign investment (portfolio investment) in the stock market of the country continues to be negative. In the last financial year, foreign investment (net) in the stock market left $1.8 crore. Foreign investment in the stock market in the previous financial year was (negative) $158 million.
Having a current account 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 meet it with loans. As such, it is better for developing countries to have a current account surplus.
But the country’s current account balance now stands in the negative. The latest information says that the current account deficit in the last financial year stood at $333.40 crore. This deficit was $1,863 million in the same period of the previous financial year.
Bangladesh is also in deficit in overall transactions. The total transaction (negative) amount of the last financial year stood at $822 crore. This index was a deficit of $665 million at the same time last year.
According to the data, the expatriate Bangladeshis sent remittances of $2,161 million last financial year. The previous year sent $2,103 million. The growth is 2.75 percent.
Bangladesh Bank went to various commercial banks and sold $13.5 billion in the fiscal year 2022-23. It sold another $7.62 billion in the previous fiscal year. Thus, the foreign exchange reserves are continuously decreasing due to the sale of dollars. As of June 25, reserves stood at $30.84 billion.