Trade deficit widens to $2b as exports fall, petroleum, fertiliser import costs rise
According to BoP data, imports grew by 8.6% in July, while exports declined by 1.9%. As imports exceed exports, the trade deficit widens.
Bangladesh's trade deficit widened in July, the first month of the current fiscal year, mainly due to higher import costs of petroleum products and fertiliser, while exports declined.
The trade deficit rose to $2.09 billion in July, compared with $1.5 billion in the same month of the previous fiscal year, according to balance of payments data released by the Bangladesh Bank yesterday (8 September).
According to BoP data, imports grew by 8.6% in July, while exports declined by 1.9%. As imports exceed exports, the trade deficit widens.
Petroleum product imports amounted to $1.37 billion in July, up from $750 million in the same month a year earlier, representing an increase of more than 83%.
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Meanwhile, fertiliser import costs rose also by 50% to $187 million in July, compared with $125 million a year earlier.
Dr Zahid Hussain, former lead economist at the World Bank's Dhaka office, said a single month's balance of payments data was not enough to draw any significant conclusion.
"However, the trade deficit has widened because imports increased while exports declined. The deficit was also lower in the same period of the previous fiscal year," he said.
Current account surplus
Bangladesh's current account surplus stood at $64 million in the first month of the current fiscal year, down from $125 million in the same month of the previous fiscal year.
The surplus declined despite higher remittance inflows, mainly because the trade deficit exceeded $2 billion. However, the key factor keeping the current account in surplus was the strong inflow of remittances.
Bangladeshis working abroad sent home $2.86 billion in remittances in July, compared with $2.48 billion in the same month a year earlier. This represents a 15.4% year-on-year increase in remittance inflows.
Dr Zahid Hussain said the current account remained in positive territory because of the rise in remittances.
"The current account could have gone into deficit because of the large trade deficit, but the increase in remittance inflows prevented that," he said.
Financial account turns negative
The financial account recorded a deficit of $677 million in July, compared with a deficit of $746 million in the same month of the previous fiscal year.
The financial account had remained in surplus until June of the previous fiscal year.
Dr Md Ezazul Islam, director general of the Bangladesh Institute of Bank Management (BIBM), said the main reason for the financial account deficit was a $536 million net deficit under deposits, money and banking-related flows (DMBs and NBDCs).
"This means payments to overseas banks increased, resulting in higher outflows of funds from the country," he said.
In July of the previous fiscal year, this component had recorded a surplus of $53 million.
Bangladesh Bank data show that the negative financial account pushed the overall balance of payments into deficit.
