Published in The Daily Star on Wednesday, 8 November 2017
Current account deficit widens to $1.79b
Star Business Report
The country’s current account deficit widened further in the first three months of this fiscal year due to sluggish export earnings and higher import payments.
In the July-September period of 2017-18, the deficit stood at $1.79 billion, which was $539 million in the surplus in the same period a year earlier, according to the central bank data.
The current account also registered a deficit of $451 million in the first two months of this fiscal year.
Strong import growth coupled with a moderate rise in exports contributed to the current account deficit, a Bangladesh Bank official told The Daily Star yesterday.
In the quarter, imports rose 28.38 percent year-on-year while exports grew 7.70 percent, both of which resulted in the further widening of trade deficit.
The current account registered a deficit of $1.48 billion in 2016-17 against a surplus of $4.26 billion a year earlier.
The government should take up initiatives to increase the export earnings with a view to tackling the large current account deficits, Khondaker Golam Moazzem, research director of the Centre for Policy Dialogue, told The Daily Star yesterday.
A moderate growth in inward remittances also left an adverse impact on the current account, he said.
The Bangladeshi diaspora sent home $4.55 billion in the first four months of the current fiscal year, up 6.89 percent from a year earlier.
“The central bank should take more initiatives to prevent hundi for the sake of increasing the remittance,” he said.
Hundi is an illegal cross-boundary channel for financial transactions.
“The deficit of current account will decrease significantly if hundi can be prevented.”
The trade deficit also widened 133.37 percent year-on-year to $3.65 billion in the three months to September.
Moazzem said trade deficit is a usual phenomenon for a developing country like Bangladesh.
But higher import payments mainly for food grains and petroleum products pushed up the gap significantly in the last few months, he said.
The gap has also depreciated the local currency against the US dollar.
The average taka-dollar exchange rate stood at Tk 80.92 yesterday, which was Tk 78.45 a year ago, according to central bank statistics. Subsequently, at the end of September, the overall balance was $360 million in contrast to $1.79 billion in the negative a year earlier.