Trade deficit drops by 34pc in H1 due to import fall

February 14, 2013

The country’s trade deficit in the first half of the current financial year decreased by 34.13 per cent compared with that of the same period of FY 2011-12 due mainly to negative import growth, said Bangladesh Bank officials. According to BB data to be released today, the import in July-December registered a negative growth of 6.69 per cent to $16.06 billion from $17.21 billion during the corresponding period of FY 2011-12.
On the other hand, the country’s exports increased by 6.47 per cent to $12.38 billion in July-December of the financial year from $11.63 billion during the same period in FY 2011-12.
Under the circumstances, the trade deficit, the gap between export earning and import payment, decreased by 34.13 per cent to $3.67 billion in the first half of the financial year against $5.58 billion in the same period of FY 2011-12.
It is usually considered that a narrowed trade deficit trend is positive for macro-economic situation of any country but it is now alarming for Bangladesh, a BB official told New Age on Wednesday.
A decreased import trend in capital machinery and industrial raw materials in the first six months of FY 2012-13 pushed a significant reduction in trade deficit, he said.
The BB data showed that the growth in the settlement of letters of credit for industrial raw materials and capital machinery had posted a negative growth of 5.30 per cent and 23.68 per cent respectively in July-December of FY 2012-13 compared with those of 16.19 per cent and 31.87 per cent growth in the corresponding period of FY 2011-12.
The BB data, however, showed that the import of food grains (rice and wheat) and petroleum had also decreased significantly in the period.
LC settlements for food grains (rice and wheat) in July-December had posted a negative growth of 38.99 per cent from a negative growth of 29.65 per cent in the same period of FY 2011-12.
The capital machinery and the industrial raw material are essential for growing economy like Bangladesh, the BB official said.
The recent political volatility in the country has created an unfriendly business environment to set up new industries resulting in a negative growth in capital machinery, he said.
‘Besides, the country’s export demand also declined due to the existing economic turmoil in the USA and Western Europe. In Bangladesh, industrial raw materials are mainly imported for export-oriented industries. So, the import of the product maintained a declining trend in the last few months,’ the official said.
The BB data, however, showed that the service sector deficit in the first six months of FY 2012-13 increased by 29.45 per cent to $2.10 billion.
In July to December of FY 2012-13, the country received $55 million from the service sector but it paid $1.08 billion.
Transportation, travel, communication services, insurance and financial services, information and communications technology services, entertainment, culture and their related services are considered as service sector.
An increased trend in inward remittance has strengthened the current account balance in the first six months of this financial year, said another BB official.
The current account balance in July-December stood at $850 million against a negative figure of $1,646 million in the same period of FY 2011-12, according to the BB statistics.
The foreign direct investment in the first half of FY 2012-13 increased by 7.45 per cent to $750 million year-on year while medium and long-term loan increased by 91.64 per cent to $1,054 million.

Courtesy of New Age

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