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The country’s trade deficit widened by six times or $3.42 billion year-on-year in the July-August period of the current fiscal year 2021-2022 amid a sharp increase in import payments.
The latest Bangladesh Bank data showed that the trade deficit surged to $4.12 billion in July-August of FY22 from $697 million year-on-year.
In the first two months of FY22, the country’s import payments rose by 45.96 per cent or $3.42 billion compared with that in the same period of the previous year when the country was going through the first wave of Covid outbreak and the businesses were sceptic about how long it would take to restore normalcy.
A gradual decline in the coronavirus infection cases after the second wave of the pandemic in the country and the subsequent relaxation of restrictions starting on August 11, 2021, the businesses have resumed imports, bankers said.
They said that the massive vaccination in Western and European countries and the gradual restoration of normalcy in those countries had prompted the businesses to increase imports.
So, import payments increased to $10.85 billion in July-August from $7.43 billion in the same months of the past year.
The export earnings were low in the first two months of FY22 due to the lower shipments of readymade garment products as production in the factories was suspended for seven-nine days for Eid-ul-Azha holidays.
In July-August of FY22, export earnings inched down to $6.73 billion from $6.74 billion in the same period of 2020.
Bangladesh Garment Manufacturers and Exporters Association director Asif Ibrahim recently told New Age, ‘The BGMEA has unpublished data that show a 11.46-per cent negative growth in RMG export only in August and this happened due to Eid holidays.’
Asif, also the vice-chairman of Newage Group, said that most of the factories remained closed for at least seven days due to the Eid holidays and in another seven days full production capacity could not be utilised as workers did not join in full force in the factories.
As a result of the sharp increase in import payments against a contraction in export earnings, demand for the dollar in the interbank money market increased significantly in August and September.
Interbank exchange rate of the dollar was 84.81 on August 1 and subsequently it increased to 85.5 on Monday even after the injection of around $1 billion by the central bank in the market in the July-September period of FY22.
The country’s trade deficit reached a record high of $22.8 billion in FY21 from $17.85 billion in the previous fiscal year.
The BB data also showed that the country’s gross foreign direct investment increased by 12 per cent to $583 million in July-August of FY22 from $518 million in the same period of FY21.
The country’s net FDI increased by to $295 million in the first two months of FY22 from $151 million in the same period of the previous fiscal year.
In July-August of FY22, the country’s current account balance turned $1.24 billion negative from a positive balance of $345 million in the previous month and a $3.23 billion surplus in the first two of FY21.
The country, however, has a surplus financial account of $1.87 billion in July-August of FY22 against a deficit of $1.07 billion in the same period of FY21.
Withdrawal of investments from the capital market continued in July-August of FY22.
Foreign investors withdrew $43 million in portfolio investments from the stock market in July-August against their withdrawal of $94 million in the same period of the past year.
(FE)
