Financial account gap worsens

Bangladesh grapples to put its balance of payments in a comfortable state, as the country's financial-account deficit worsened further as per latest official data. As of February, its current account, however, posted a significant surplus largely for tightened important and some gains from export and remittance. According to Bangladesh Bank data (BB) released Wednesday, the financial account posted a deficit of US$8.4 billion during July-February of this fiscal year while current -account surplus was worth $4.8 billion. The financial-account deficit has worsened mainly due to unfavourable trade credit. The net trade credit stood at $10.8 billion worth of deficit during the period under review. It was $3.6 billion during the period a year earlier. The February surplus of current account was primarily attributed to higher exports, increased remittances, and a significant decline in imports. Economists say the overall health of the Balance of Payments (BoP) is not good despite the fact that current account posted huge surplus. Current-account surplus is usually believed to be enough for good BoP which accounts for the sum total international monetary transaction between Bangladesh and the rest of the world. "But this time I'm worried as the financial account has worsened further," says Dr. Zahid Hussain, an independent economist of Bangladesh. The import reduction of more than 15 per cent is the reason behind the current -account surplus. However export grew by 3.8 per cent during the period. "Current -account surplus was widely appreciable," he notes about the positive side of balance. However, the fundamentals are not strong since the surplus resulted mainly from a drastic cut in the imports and overall reduction in trade deficit. "Lower imports hinder industry growth." Dr Hussain sees trade-credit deficit as main reason behind the financial-account deficit. There is growing difference between export receipts and export shipments. Further details showed that trade balance dropped to $4.6 billion during July-February period. It was $13.4 billion during the same period a year earlier. In the meantime, the overall balance also dropped to $4.4 billion or more than 44 per cent down from a year before. Dr Masrur Reaz, chairman and CEO of Policy Exchange of Bangladesh, suggests that the import restrictions should be eased as the economy is being affected by supply contractions. "The government is also losing taxes following lower volume of imports." However, the capital account posted $196 million during the eight months between July and February. [email protected]
Published on: 2024-04-03 20:33:30.461033 +0200 CEST