Trade deficit continues to widen - Share market analysis of dhaka stock exchange, Bangladesh

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13 February, 2018 11:03 AM Source: The Daily Star Bangladesh


Trade deficit almost doubled to $8.62 billion in the first half of the fiscal year as fears of depreciation of the taka and pressure on foreign reserves mount.

If the trend continues, the trade gap will surpass $19 billion this fiscal year, said Ahsan H Mansur, executive director of the Policy Research Institute of Bangladesh, a private think-tank.

The economist blamed the soaring demand for imports from businesses for the growing imbalance in the country's external trade.

During the July-December period last year, imports stood at $26.31 billion, up 25.76 percent year-on-year, according to data from the Bangladesh Bank.

At the same time, exports rose 7.8 percent to $17.69 billion.

If the trade imbalance intensifies, it will have a terrible impact on the foreign exchange reserves and will lead to further depreciation of the local currency against the US dollar, said Mansur.

“The majority of the banks are now facing greenback shortage amid the huge import demand from businesses,” he added.

The rising trade gap dragged the current account deficit to an all-time high: in the first half of fiscal 2017-18, the deficit stood at $4.76 billion in contrast to $543 million a year earlier. AB Mirza Azizul Islam, a former finance adviser to a caretaker government, said that the lower export growth is one of the reasons for the record current account balance deficit.

“Remittance has recently increased, but it has yet to reach a desirable level,” he said. In the first six months of 2017-18, remittance stood at $6.79 billion, up 11.84 percent year-on-year. “The growth does not reflect the real scenario as remittance decreased massively in the last fiscal year,” said Islam.

Echoing Mansur, the former adviser said the country's foreign exchange reserves would come under pressure if the import growth continues to rise.

The government should take attempt to stop over-invoicing, Islam said.

At the end of December, the overall balance was $354 million in the negative in contrast to $2.26 billion in the surplus a year earlier. 

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