Trade deficit reduced but fiscal deficit large

Farhad Chowdhury: As a result of the restrictive measures against the dollar crisis, imports fell. At the same time exports and remittances are increasing. Due to this, Bangladesh’s trade and current account deficit with the outside world has decreased a lot. However, the country’s financial deficit has been created due to various reasons, including the decrease in foreign loans and investments, the pressure of repayment of previous loans. In the first month of the current financial year, the trade deficit has decreased by 70 percent compared to the same period of the previous year. On the other hand, the financial deficit has increased 13 times. Bangladesh Bank released the balance of payments or foreign exchange balance statistics for the current financial year yesterday.
According to the data of the report, in July of the current fiscal year 2023-24, it has exported goods worth $435.6 million. At this time, $499 million worth of goods were imported. Due to this, Bangladesh has a trade deficit of $63.5 million in the first month of the fiscal year. The trade deficit was $2.1 billion during the same period last year. In other words, the trade deficit has decreased by 70 percent during the year.
The central bank is trying to control imports in various ways to overcome the dollar crisis. The government has increased the import duty of various products since July last year. At the same time, there is a cash margin requirement of 75 to 100 percent at the time of LC opening for relatively low demand or luxury products. A loan cannot be taken from any bank with this margin money.
Apart from this, Bangladesh Bank is verifying the correctness of the information 24 hours before the opening of large LC. Banks have been asked not to open LCs without providing dollars. Due to this, imports decreased by 14.92 percent in the last financial year, while exports increased by 15.61 percent.
The last fiscal year 2022-23 ended with a trade deficit of $17.15 billion. As a result, the current financial year has started with a deficit.
According to Central Bank data, there was a deficit of $89.5 million in foreign trade finance in July, which is more than 13 times more than the same period of the previous fiscal year. In July of the last financial year, this deficit was $66 million.
The relevant officials of the central bank say that imports are more than exports, prices of all types of products including energy are on the rise in the global market and remittances are not expected as expected and foreign investment is decreasing, this deficit is being created.
They said that the increase in the deficit in the overall trade balance means that the country has to pay more than the amount of foreign exchange coming in from various sources. In such a situation, the central bank is selling a large amount of dollars from the country’s foreign exchange reserves to avoid the repayment risk.
According to the latest data, Bangladesh Bank has sold $2.24 billion to various banks since the beginning of the current financial year till August 31. As a result, reserves are continuously decreasing. On September 10, the reserve fell to $21.50 billion.
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. According to the latest data, the current account surplus in July stood at $53.70 crore. In the same period of the previous financial year, this deficit was $45 million.
Bangladesh has a big deficit in the overall transaction (overall balance). Total transaction (negative) in July stood at $106.7 million. This index was $108.10 million short at the same time last year. According to the report, expatriate Bangladeshis sent remittances of $197 million in the first month of the fiscal year. At the same time last year, he sent $209 million. Remittances decreased by 5.87 percent in July compared to the same period of the previous year.
Foreign direct investment (FDI) in the country increased marginally. In July, the first month of last financial year 2022-23, Bangladesh received FDI of $47.8 million. In July of the current fiscal year, $50.50 million have come.
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 increased marginally during the financial year under review. This index increased by 5.36 percent over the previous year to $16.7 million. The net foreign investment in the previous financial year was $168 million.
However, net foreign investment (FDI) decreased by $107 million during the period under discussion; which decreased by $26.6 million in the previous year.
At the same time, foreign investment (portfolio investment) in the stock market of the country continues to be negative. In the last financial year, the foreign investment (net) in the stock market left $2 lakh more than what came in. Foreign investment in the stock market in the previous financial year was $32 million.