Published in The Financial Express on Tuesday, 18 March 2014.
Higher imports, drop in remittance inflow put BOP under pressure
Jasim Uddin Haroon
The country’s balance of payments (BoP) surplus stood at US$ 2.7 billion at the end of the July-January period of the current fiscal (2013-14) compared to that of $2.9 billion recorded at the end corresponding period of the last fiscal, according to the Bangladesh Bank’s latest statistics.
Economists have attributed the fall in Bop mainly to the decline in the inflow of remittances and increase in the outflow of capital in the form of import payments.
They said the BoP’s financial account witnessed a negative growth of $174 million during the first seven months of current fiscal against a positive growth of $2.2 billion in the same period a year earlier.
They also said fall in inflow of remittance resulted in the reduction of the current account balance.
The economists said increased credit to the private firms to procure goods and services from abroad resulted in reduction in the financial account balance.
However, the analysts believe that the country’s BoP surplus will drop further in the current fiscal year (2013-14) following fall in remittances and possible rise in imports.
Ahsan H Mansur, executive director at the Policy Research Institute of Bangladesh (PRI) told the FE that the overall BoP was likely to fall further at the end of this fiscal.
“Fall in remittances and rise in imports will affect the BoP surplus adversely,” he said.
He said the BoP surplus might fall by around $1.0 billion at the end of 2013-14.
Dr Zaid Bakht, director (research) at the Bangladesh Institute of Development Studies (BIDS) said the foreign fund disbursement has fallen in recent period leading to reduction in the overall BoP.
Mr. Bakht also said negative growth in the remittance earnings has also contributed to the reduction in BoP surplus.
He said the current account balance shrank during the July-January period and the main reason was the negative growth in remittance inflow.
The workers’ remittances in the current account portion grew negatively over 7.0 per cent in the July-January period, the latest central bank statistics said.
Mr Bakht, however, was critical of the rise in imports. “The food imports grew in recent times and this definitely will not spur development in industrial sector.”
Dr. Khandker Moazzem, additional director at the Centre for Policy Dialogue (CPD) told the FE that increased volume of capital outflow in the form of trade credit was the main reason for the reduction of the BoP.
The country’s net trade credit grew negatively and it stood at $1.5 billion during the July-January period.
“Look, it was only $133 million during the July-January period in 2012-13 fiscal year,” Mr. Moazzem said.
However, the trade balance, which shows relationship between imports and exports, improved somewhat following rise in exports.
The trade deficit has been narrowed by more than 35 per cent in the July-January period.