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Country’s trade deficit narrowed by 14.76 per cent or $2.68 billion in the recently concluded financial year 2018-2019 compared with that in the previous fiscal year mainly due to slowdown in import growth, especially by the industrial sector.
Bangladesh Bank officials and economists said that the reduction in trade deficit was good for any country, but drop in capital machinery import and stagnant industrial raw material import growth in FY19 were causes of concerns for the country as such drop indicated stagnant industrial sector and investment.
In FY19, trade deficit fell to $15.49 billion from the record $18.18 billion deficit in the FY18, showed a Bangladesh Bank data released on Monday.
The BB data also showed that the country posted 10.09 per cent growth in export earnings against a tiny 1.79-per cent growth in import payments thus resulting in fall in trade deficit.
In FY 19, export earnings increased to $39.95 billion from $36.29 billion in the previous fiscal year, because of good growth in readymade garment exports amid US-China trade war.
BB data showed that earning from export of garments, the main export item of the country, rose by 11.49 per cent in FY19.
On the other hand, import payments grew to $55.44 billion in FY19 from $54.46 billion in FY18.
The country’s current account deficit also dropped by 45.08 per cent or $4.31 billion to $5.25 billion in FY19 from $9.57 billion in the previous fiscal year.
The deficit was only $1.331 billion in FY17.
Terming the narrow down in trade deficit as a good sign,
Former interim government adviser AB Mirza Azizul Islam told New Age that the fall in trade deficit was a good sign. ‘Trade deficit fell mainly due to the lenient import growth,’ he said.
Fall in import of food items, capital machinery and industrial raw materials were the reasons for minimal growth in import payment, he said, adding that the sufficient production of crops was the reason behind the lower import of food items.
On the other hand, fall in capital machinery import and paltry growth in industrial raw materials import referred to static state of investments and non-utilisation of capacity of the existing industries, he said. ‘Such import situation is not positive for the country’s economic growth.’
BB data showed import of capital machinery fell by 9.43 per cent in FY19 compared with that of FY18 while import of industrial raw material grew by only 4.61 year-on-year in FY19 compared with 12 per cent growth in FY18.
Aziz said that the measures should be taken to accelerate investment and business sector instead of being overwhelmed by the narrowed trade deficit.
In FY19, net inflow of foreign direct investment rose by 42.86 per cent, or $762 million, to $2.54 billion in FY19 against $1.78 billion in the previous fiscal year.
Speaking about the FDI, Aziz said that the intercompany loan constituted a major portion of foreign investments and such amount was repatriated by the mother companies after a certain period of time.
BB officials said that although current account balance narrowed in FY19, the figure over $5 billion in deficit was too high for the country.
The country’s foreign exchange reserves declined by 1.2 per cent, or $394 million, to $32.55 billion from $33.94 billion, the BB data showed.
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