Published in The Financial Express on Saturday, 24 May 2014.
Current account surplus falls on higher payments
Reserve, however, not under pressure
FE Report
The country posted a much lower current account surplus in March last than that in the corresponding period last year on higher payments for services.
Economists say comparatively low receipts from transportation, travel and government services affected the current account situation in the month under review.
The current account surplus stood at US$ 1.5 billion in March last, at least 42 per cent less than that of the corresponding period in 2013, according to Bangladesh Bank (BB) statistics.
Economists say Bangladesh has become feeble in the service sector as the payment for transportation, travel and consultancies were higher than receipts.
The payment for transportation by sea and air grew by more than 21 per cent while receipts grew by nearly 11 per cent.
Payments from different international organisaitons for government services grew more than 45 per cent against the receipts that grew by 22 per cent.
On the other hand, the receipts from the telecommunications, computer and information services were comparatively satisfactory. It grew by more than 25 per cent to $ 342 million during the July-March period last, the BB statistics said.
Dr. Zahid Hussain, lead economist at the Dhaka office of the World Bank, said Bangladesh’s net service earnings were negative and it led to the sharp fall in the current account surplus.
He said there was no immediate concern about the fall in the current account surplus, as it would not create any pressure right at the moment on the economy.
He, however, said a higher current account surplus leads to build-up of the foreign exchange reserve. The forex reserve of more than $ 20 billion was now remaining almost idle, he added.
Dr. Ahsan H Mansur, executive director at the Policy Research Institute of Bangladesh (PRI), said the poor remittance inflow was the one of main reasons for the fall in the current account surplus. Another reason was the rising imports, he added.
Remittance earnings dropped by more than $600 million up to March last over the corresponding period in 2012-13.
Imports (C & F) jumped to more than 17 per cent in the July-March period. The figure in the fiscal year 2012-13 was negative. It dropped by more than 4.0 per cent.
He said the current account surplus could fall further as the imports were peaking up.
Dr Khondaker Golam Moazzem, additional director of the Centre for Policy Dialogue (CPD), said Bangladesh was paying higher on transportation for exports.
He said there was a question as to whether this type of payment for exports was relatively good for the economy or not.
“We need to respond to this change by increasing productivity in the services sector,” Mr. Moazzem said.
Bangladesh’s current account balance came under pressure in the FY 2010-11 as the trade balance recorded a string of deficits due to the rising energy bill, higher imports and disappointing exports.